Wednesday, February 9, 2011

Fairholme Fund Portfolio Update

Both the Fairholme Fund (FAIRX) and Yacktman Fund (YACKX) have been among the best performers among equity funds over the past decade.

YACKX*: 11.81% annualized 10-year return
FAIRX: 11.68% annualized return
S&P 500: 1.85% annualized return

With such similar results one might expect at least some overlap in terms of what they tend to own. 

Let's compare.

In this recent post, I noted the top five holdings of the Yacktman funds with the top five stocks make up ~35-40% of the portfolio.

Yacktman Funds Sector Weighting
23% Media
21% Healthcare
19% Consumer Staples

Less than 3% of the funds exposed to financial stocks.

Fairholme's top five holdings look very different based upon his recently reported portfolio update.

In fact, it would be tough to be more different.

Just under 50% of the portfolio is made up of the top five holdings.

Fairholme Fund Sector Weighting
79% Financials
7% Consumer Services
6% Industrials

Check out this post to see a summary of the recent changes made to the Fairholme portfolio.

So Fairholme has a 79% weighting toward financials compared Yacktman having less than 3%.

Based upon current top holdings and recent actions, clearly these two top portfolio managers are taking divergent paths to achieve future results.

Both funds are obviously run by managers with great long-term track records but very different approaches.

Though both are impressive the contrast in styles is worth pointing out: Fairholme style tends to require higher turnover while Yacktman has a lower turnover approach and, in general, tends to own stocks that allow the portfolio to put Newton's 4th Law to work.

Adam

* Yacktman Focused (YAFFX) performed slightly better with a 12.32% annualized return over the past ten years.
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