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Fund Spy: Morningstar Medalist Edition

Brisk Morningstar Analyst Ratings Activity Heading Into Fall

Thirty-eight ratings debuted in September.

Mentioned: , , , , , , , , ,

In September, Morningstar manager research analysts downgraded the Morningstar Analyst Ratings of five funds, upgraded four funds, moved one rating to under review, and assigned new ratings to 38 funds. Highlights of the ratings activity can be found below as well as a full list of ratings activity for the month.

 Fairholme (FAIRX): Neutral from Silver
On pace for its third consecutive bottom-decile calendar-year finish and after nearly $5 billion in three-year net outflows, Fairholme faces serious liquidity risks. These risks and poor results lead to a cut in the fund's rating to Neutral from Silver. The fund has endured outflows in every month since March 2011, a total of nearly $15.7 billion. During that time, manager Bruce Berkowitz raised cash mostly by selling liquid stocks like  AIG (AIG),  Bank of America (BAC), and  Berkshire Hathaway (BRK.A). But such stocks are gone. The largest holding as of May 2016 was St. Joe (JOE) at 13.8% of assets. Fairholme owns 31% of the shares outstanding. Morningstar estimates it would take more than 100 days to sell that position without affecting the share price. Plus, Berkowitz is the chairman, further complicating matters.

Emory Zink does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.