10
Last month I shared my top holdings, and I’m contin-
uing with that theme by picking up where I left off.
As I get deeper, we see some more supporting players
in addition to core holdings.
Perkins Mid Cap Value
JMCVX
has struggled
during the past five years. Its recent sluggishness has
affected its
10
-year record, which lags the Russell
Midcap Value benchmark. Its cash stake, a fallout of
its valuation-driven process, has weighed on returns
in a largely up market. Some problematic stock picks,
particularly in the consumer discretionary sector, and
an overweighting to energy have also hurt.
Perhaps compounding the pressure were inflows
from
2008
to
2010
that doubled the fund’s asset base.
(The fund closed to new retail investors in
2010
and
has since had net outflows.) The team hasn’t changed
its investment philosophy, though. It still analyzes a
stock’s potential for loss before considering its upside,
which has cushioned performance in down markets.
And its record since its
1998
inception remains strong.
Royce Special Equity
RYSEX
is one of the easiest
funds to own. Charlie Dreifus is a brilliant conserv-
ative investor who focuses on companies with clean
accounting and cheap stocks. He generally loses
less in downturns, so I feel good owning the fund
when markets get frothy. I also like that this fund
twice closed in a timely fashion, illustrating Dreifus’
commitment to serving shareholders. Dreifus’ other
fund,
Royce Special Equity Multi-Cap
RSEMX
, is
still open to new investors.
Wasatch Small Cap Growth
WAAEX
also has a
seasoned hand in charge. Jeff Cardon seeks out
companies with strong cash flow and earnings growth,
and he avoids those drowning in debt. Cardon has
been running this fund since
1986
and has built a
great record. The fund is slightly closed—meaning
you have to invest directly through Wasatch to get
in. But really, it’s not hard to get into good small-cap
funds before they close—you just have to get in
before the market has doubled in a short period. In
2009
, virtually every small-cap fund was open.
Fairholme
FAIRX
is like good scotch: best enjoyed in
moderation. It’s less than
5%
of my portfolio because
I’m not willing to bet my retirement on Bruce Berk-
owitz being right. He probably will be right, but with
more than half the fund in
American International
Group
AIG
,
Bank of America
BAC
, and
Sears
SHLD
,
this might be the riskiest fund I own. Yes, it’s doing
great this year and has been great in six of the past
seven years, but that one off year was brutal, and
the current portfolio just about guarantees the fund
will have another off year.
Jensen Quality Growth
JENSX
is the opposite
side of Fairholme. Although concentrated, it is
focused on strictly high-quality names so that per-
formance is actually pretty mild mannered. It is
more growth-focused, too, so you have managers
willing to pay a little more for high quality. How-
ever, both Fairholme and Jensen are low-turnover,
long-term-focused vehicles.
American Funds Washington Mutual
AWSHX
has a dividend focus that makes it an appealing play.
I own the cheap R
5
retirement shares (
0
.
35%
expense ratio and no sales load) in my
401
(k). I like
the stability of management and the consistency
of approach. The yield bias has helped it hold up well
in the past two downturns. The fund wants proven
dividend payers, and it has balance sheet and income
statement standards that all holdings must meet.
Although American Funds has seen a lot of outflows,
this fund shows why its approach has merit.
œ
More of My Holdings
The Contrarian
|
Russel Kinnel
Our Contrarian Approach
I go against the grain to find
overlooked funds that may be
ready to rally.
