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Bruce Berkowitz's 2020 Annual Fairholme Fund Shareholder Letter

Discussion of markets and holdings

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Sydnee Gatewood
Feb 03, 2021
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January 28, 2021

Dear Fellow Shareholders:


Fairholme Fund (Trades, Portfolio) increased 46.9% versus an 18.4% increase for the S&P 500 Index in 2020. The preceding graph and performance table compare The Fairholme Fund (Trades, Portfolio)'s unaudited performance (after expenses) with that of the S&P 500 Index, with dividends and distributions reinvested, for various periods ended December 31, 2020. The value of a $10,000 investment in The Fairholme Fund (Trades, Portfolio) at its inception was worth $83,577 (assumes reinvestment of distributions into additional Fund shares) compared to $38,539 for the S&P 500 Index at December 31, 2020. Focused investing has led to overall performance that is more than twice that of the Index.

St. Joe's (

JOE, Financial) common stock price increased last year by 120%. The company is uniquely positioned for decades of profitable growth along Northwest Florida's Emerald Coast. Residential, commercial, and hospitality segments are breaking records. Pricing is robust. Homes sell before completion. Apartments are fully occupied. Clubs by JOE expands. Hotels are in construction at Santa Rosa Beach, Camp Creek, Beaches International Airport, Pier Park, Panama City Beach's Sports Complex, and Panama City's downtown marina. The Powder Room, Watercrest, and Watersound Insurance opened for business. Latitude Margaritaville Watersound will soon open. Tyndall AFB's multi-billion dollar expansion will require thousands of additional homes. St. Joe is only scratching the surface.

Homes on Florida's Emerald Coast, South of SR 98, sell for at least $1,000,000 – and multiples more. North of the highway, at Watersound Origins, homes price about $630,000. East, at Breakfast Point, homes average around $400,000. North of the intra-costal waterway, Latitude prices start about $250,000. Commercial acreage fronting the highway sells for $200,000 and exceeds $500,000. St. Joe's entitled lands in Walton, Bay, and Gulf Counties may be worth exponentially more than implied by the company's market value.

Fannie Mae (

FNMA, Financial) and Freddie Mac (FMCC, Financial) insure the availability of 30-year fixed-rate mortgages. Home ownership has never been more affordable or sustainable during crises with Fannie and Freddie guarantees. The enterprises have been under federal control since 2008. The U.S. Treasury only recently agreed to their retaining the earnings necessary for capital safety and soundness. Treasury still has not agreed that $191 billion of "loans and fees" have been repaid – even after receiving over $300 billion of reimbursements and controlling 80% stakes. I expect The Supreme Court will recognize the rights of private enterprise and remedy this gating issue to Fannie's and Freddie's exit from conservatorship.

Copper prices increase with global growth and innovation. Gold rises with monetary expansion that cheapens paper money. Imperial Metals' (

TSX:III, Financial) investment in Red Chris has world-class potential. Huckleberry and Mt. Polley may restart production with higher prices. King Copper drilled 20 grams of gold per ton over 3 meters. There are 20 other investments buried across British Columbia. Imperial has great expectations.

U.S. Treasury Bills and Treasury money market funds composed 21% of the Fund. I and affiliated entities own 27% of the Fund.

Respectfully submitted,

Bruce R. Berkowitz

Chief Investment Officer

The Fund's investment objectives, risks, charges, and expenses should be considered carefully before investing. The prospectus contains this and other important information about the Fund, and it may be obtained by calling Shareholder Services at (866) 202-2263 or visiting our website Read it carefully before investing.

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