I’ve been and will continue to be a huge fan of Bruce Berkowitz. I find his investment style to be most similar to that employed at T&T Capital Management. Berkowitz pores over financial statements to assess intrinsic value and he isn’t afraid to stick to his guns through adverse market conditions, as seen by the heavy concentration in financial stocks. It was amazing to see so many investors, commentators, etc imply that he had lost his touch because of one bad year. Market participants that try and jump in and out of the “hot funds” as usual are the ones that get hurt the most.
“In the 12-month period ending February 29th, the fund fell 14.5% yet the average investor lost a whopping 21.4% — almost 50% worse. Sure, Fairholme has struggled. But shareholders buying near its peak in early 2011 never gave it a chance.”
Investment process is more important than simply dwelling on past performance. The best investors over time have temporary periods of underperformance, while many lackluster managers have great years like we saw with tech fund managers in the late 90’s. The key is for the investor in the fund or the separately managed account to have an understanding of the investment methodology, and to have a plan of evaluating things. It is very tough to evaluate a manager without giving a 5 year time horizon, but this is very difficult for many to grasp. AT TTCM we put a tremendous amount of effort to communicate our investment theses to clients so that they are comfortable dealing with volatility. This includes regular webinars, literature, research reports, etc.