10
Want to find some funds due for a rebound? Look for
sectors that have been crushed. The markets tend
to rotate through sectors. Fund managers often have
a bias or their strategies have a bias toward certain
sectors so that they, too, go in and out of favor.
The past five years have been a time when stocks
have rebounded but commodity prices have not.
That’s partly because of the great recession and partly
because of signs that China is slowing down. But
these things go through cycles. Those sectors merely
need to be closer to marketlike performance for good
funds to produce improved performance.
I looked for Morningstar Medalists that had sizable
weightings in energy and materials. Of course,
low expense ratios increase a fund’s chances for
success, so I’ll take them in order of costs.
DFA Emerging Markets Value
DFEVX
is a passively
managed fund that charges just
0
.
53%
. It has
14%
in
energy and
14%
in materials because emerging
markets are natural-resources-heavy. Its trailing three-
and five-year returns are subpar in part because of
those weightings, but its
10
- and
15
-year figures are
strong and I don’t see why it can’t return to form.
It’s become easier for investors to gain access to
DFA
,
but it still isn’t available on every platform.
FPA Capital
FPPTX
is a closed mid-value fund run
with tremendous levels of caution. It charges
0
.
83%
.
I’d be inclined to hold on if I owned it, and it’s also
worth keeping in mind should it reopen. Bob Rodri-
guez handed the reins to Dennis Bryan, and, along
with later addition Arik Ahitov, he’s done a fine job of
finding good companies trading at a big discount
to their value. That’s led the fund to some oil drillers
among other things. It has
26%
in energy and
1%
in materials.
Dreyfus Appreciation
DGAGX
is quite a different
animal. Subadvised by the venerable Fayez Sarofim
&
Co. of Houston, the fund loves blue chips in both
consumer and energy areas. They are patient inves-
tors and patient employees as there’s little turnover
in the manger suite as well. The fund’s emphasis on
quality gives it exposure to another lagging factor.
All told, it has
18%
in energy and
3%
in materials,
making it an excellent core holding. The fund’s
expense ratio is
0
.
94%
.
Delafield
DEFIX
invests in a different part of the
market and charges
1
.
21%
. The fund looks for deep-
value names in the small- and mid-cap realm.
Naturally, a beaten-down sector like materials is
appealing. The fund has
27%
there and
6%
in
energy. Three- and five-year numbers are unimpres-
sive, but we see plenty of reason to keep the faith
with managers Dennis Delafield and Vince Sellec-
chia. They’ve built a strong long-term record by
looking for good restructuring bets in companies
suffering from failed strategies or mergers. You can
get companies on the cheap that way, though you
have to avoid value traps, and they’ve done a fine job.
The closed
Artisan Small Cap Value
ARTVX
is in a
dreadful slump because of its sector biases and some
poor stock selection. (The fund has
19%
in energy and
7%
in materials.) That’s disappointing, but the long-
term record tells a different story that gives us hope
this slump isn’t permanent. The fund charges
1
.
24%
.
TCW International Small Cap
TGICX
manager Rohit
Sah loves emerging markets, energy, and materials,
and the fund has suffered for it. The fund has
9%
in
energy,
23%
in materials, and an astounding
39%
in India. In short, this fund is higher-risk than most
emerging-markets funds. Sah had a good record at
Oppenheimer, but this is a fund that should be held
only as a small position. The fund has a
1
.
36%
expense ratio.
œ
Betting on a Rebound in
Resource Stocks
The Contrarian
|
Russel Kinnel
Our Contrarian Approach
I go against the grain to find
overlooked funds that may be
ready to rally.
