One of our biggest dilemmas around here is what to do with the Fairholme Fund (FAIRX). We've put the fund in our Growth Powerfund Portfolio in late 2004, but sold it in June 2007 after enthusiastic recommendations by the financial media and big inflows of new money (such inflows generally mean the best days of a fund are behind it). Still, we've kept Fairholme on our favorite fund list in the mid cap value category. Now with around $10 billion in assets, we're seriously considering removing it - even though the market beating returns continue - and with low fees to boot.

Perhaps this Fox Business interview with contrarian fund manager Bruce Berkowitz will help us decide. For all those sick and tired of dull fund manager interviews by fund-clueless CNBC anchors who don't know anything about the fund they are talking about, watch this video. Bruce likes healthcare. Hopefully he's right, we have healthcare funds in our model portfolios. He also is avoiding banks - which seems like the contrarian dream sector.

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From early 2002 until mid-2006, we rated Asian funds a (Interesting - should outperform the market over the next 1 to 3 years). After investors began investing in emerging markets with somewhat irrational exuberance, we downgraded this category to a (Neutral) in 2006. In the fall of 2007, after a very hot 12-month span, we finally went with a negative rating (Weak - should underperform the market) in our most recent favorite funds ratings update. Now, at the end of 2007, we’re giving the Asian offerings our lowest rating of (Least attractive).

There are many signs that the best days are now behind us in this category. Four of our five favorite Asian funds have accumulated over $4 billion dollars in assets. Fidelity Southeast Asia (FSEAX) was up roughly 60% for the year at the end of November in spite of an 11% drop in November. Its five year annualized return is just over 35%. T. Rowe Price Asia (PRASX) posted similar returns. ...read the rest of this article»

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