341 / 708
3
Morningstar FundInvestor
August
2016
than most high-quality investors, and that’s hurt
performance until recently. The fund paid out about
10%
in capital gains in March, but it was the
December
2015
payout of
27%
that really stood out.
Amana Growth
AMAGX
This fund, with a Morningstar Analyst Rating of
Bronze, has a remarkable
76% PCGE
, and I’m sure the
27%
outflow will be enough to smoke out some
capital gains. Last year, it paid out a modest
7%
capital
gain, but I would expect it to be more this year. The
fund is rebounding nicely from a rough
2015
. It helps
that its Shariah-compliant strategy keeps it away
from banks.
Davis NY Venture
NYVTX
This near-clone of Selected American is a little better-
positioned than its sibling with
25%
outflows and
42%
capital gains.
Westport
WPFRX
This fund may have a whopper of a capital gains
distribution on the way. It is sitting on
PCGE
of
56%
,
and Westport has agreed to merge the fund into
Hennessey Cornerstone Mid Cap
30 HIMDX
pending
shareholder approval in September. When funds
merge, we often see a big cap gains payout, as the
inheriting manager doesn’t want the old fund’s tax
position going onto its books. In addition, the new
manager may not want the stock. In short, there’s a
decent chance of a very big payout coming. The funds
appear to have only one holding in common.
Gabelli Asset
GABAX
This fund is facing
22%
redemptions on a
PCGE
of
65%
.
It paid out
13%
in gains last year. It’s easy to see
the reason for the outflows. The fund is in the bottom
quartile for the trailing three- and five-year periods.
Baron Growth
BGRFX
Ron Baron’s fund has seen
21%
in redemptions but has
a
PCGE
of
65%
. Baron’s steady growth style often
means the fund lags in growth rallies and outperforms
in growth slumps. He invests in names like
Vail
Resorts
MTN
and
MSCI
MSCI
while his peers go for
biotech or fast-growing tech stocks. Thus, he’s ahead
of the pack so far in
2016
, but two poor years prior to
that have the fund in redemptions. The fund’s capital
gains payouts have doubled in each of the past two
years as Baron has to work his way through more-
profitable names.
What If You Want to Buy?
Most of the funds I highlighted carry a Bronze rating.
Thus, you might be considering buying one or maybe
a different fund with significant capital gains built up.
The simplest way to handle that would be to buy
them in an
IRA
or
401
(k), where capital gains distributions
are not an issue. If that’s not an option, you should
probably look for a substitute fund with a more appealing
tax profile.
K
Funds Likely to Send a Big Tax Bill
Name
Ticker
Potential Capital
Gains Exposure
One-Year
Net Flow $
One-Year Organic
Growth Rate (%)
Tax-Cost Ratio
Three-Year
Turnover
Ratio (%)
Selected American Shares
SLADX
50
-1,727,500,008
-48
3.86
27
Kalmar Growth-with-Value Sm Cp
KGSCX
66
-436,274,484
-46
2.31
50
Columbia Acorn USA
AUSAX
49
-476,745,448
-40
5.10
35
Royce Premier
RYPRX
56
-1,773,524,056
-39
3.20
13
Touchstone Sands Capital Select Growth PTSGX
46
-1,772,479,496
-38
1.14
29
Baron Small Cap
BSCFX
63
-1,205,652,825
-31
1.61
15
Dreyfus Appreciation
DGAGX
62
-1,091,720,273
-30
3.18
6
Amana Growth
AMAGX
76
-301,052,103
-27
1.29
0
Davis NY Venture
NYVTX
42
-4,050,462,082
-25
3.88
23
Westport
WPFRX
56
-143,200,609
-25
1.40
3
Gabelli Asset
GABAX
65
-551,222,750
-22
1.76
3
Baron Growth
BGRFX
64
-1,384,112,589
-21
1.25
7
Data as of July 31, 2016.