Winning with AIG and Bank of America

Matt is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

BusinessWeek is singing the praises of Bruce Berkowitz, head of the Fairholme Fund (FAIRX). Which is kind of funny because it wasn't all that long ago that Berkowitz was basically being hung out as an example of a washed-up has-been.

Why the rah-rahs now? Here's what BW said:

The fund had advanced 30 percent this year through last week. Holdings in [American International Group (NYSE: AIG)] contributed about half of that gain, while Charlotte, North Carolina-based [Bank of America (NYSE: BAC)] accounted for approximately 20 percent of the climb, according to data compiled by Bloomberg.

Did you follow? Two of his major investments went up, which drove his fund up, so he's once again a genius. 

I don't disagree with the idea of giving a pat on the back to Berkowitz -- I think he's a pretty sharp guy -- but what this once again reveals is the ol' "what have you done for me lately?" flavor that dominates the investment industry. Put up a lousy year and you're a joke, turn around with a great one and you're a hero. 

That style of evaluation works terribly for value investors like Berkowitz as value-oriented investments often take time to play out and don't look like obvious wins from day one (or year one). 

What should investors do? Detach themselves from that "what's the return this year/month/day" mentality and remember that it's longer-term performance that matters. Likewise it's essential to remember that to get to that long-term performance it's process, not outcome (as Mike Mauboussin stresses) that's the more important thing to focus on.


TMFKopp owns shares of Bank of America. The Motley Fool owns shares of American International Group and Bank of America and has the following options: long JAN 2014 $25.00 calls on American International Group. Motley Fool newsletter services recommend American International Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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