While there is always a risk of loss, we seek to adhere to our cardinal rule of investing: Safety First.
Investors tend to dwell on reasons why their ideas will succeed. However, even the best laid plans can fold. We continually challenge ourselves by asking, "What can go wrong?" with our existing and potential investments. By constantly stress testing our best ideas, we may either gain or lose confidence in an initial thesis, or perhaps come to accept that a long-loved holding should be let go.
Fairholme’s fundamental research process is performed by a dedicated investment research team that examines the best ideas within our circle of competence. Fairholme also enlists the help of outside experts and consultants, who more fully understand an industry's dynamics, to supplement this work.
It's true that by remaining cautious we sometimes miss out on ventures that would have been profitable had we invested in them. However, when all is said and done, we prefer the fleeting regret of a missed opportunity to the everlasting remorse of long-lost money.
The day may come when you wonder why we aren't investing in the latest get-rich-quick stock or sector. Our cardinal rule of investing will remind you why.