The Jensen Portfolio, a quality fund for volatile times

Does investing in 20 to 30 high quality stocks of successful, well-managed companies sound pretty good to you right now? Given the present downdraft in the market, funds like the Jensen Portfolio (symbol: JENSX) come into their own when times get tough. “In 2008 we did better than the S&P by about 8% and were up almost 29% in 2009,” says Bob Millen, Chairman of Jensen Investment Management and Vice president of the Jensen Portfolio. This large cap growth fund is rated five stars by Morningstar, has a low turnover rate and an expense ratio under one percent according to the fund’s prospectus. Millen argues that like the turtle, the Jensen Portfolio will always trounce the hare when it comes to long term performance. His four man investment team is methodical, currying through countless companies in search of that perfect investment: a value-creating business, with at least ten years of 15% or more return on equity that is shareholder friendly and has a proven management track record in weathering whatever the economy and business cycle can throw at it. “We are hands-on and management is a critical variable for us. Visiting with management,” he says, “is important; once we have made the investment we periodically return to take the temperature of the company and its management.” Millen knows better than most how to size up a company and its management, thanks to his background. “I don’t come from Wall Street, have never been a broker or a sell-side analyst,” he explains,” but I’ve started, ran and sold businesses in my career and when you have that kind of background...

Matthews Asian Growth and Income Fund–A conservative approach to Emerging Markets

For many investors, buying a dividend fund in a region noted for extraordinary growth seems, well, counterintuitive. Yet, the fund has returned 418% since inception which breaks down to a 16.54% annualized return according to Morningstar. Given that kind of performance, this may be a good way for conservative investors to invest in the hot spots of Asia. The fund is rated five stars by Morningstar over 10 and 3 years and last year according to Morningstar, the fund (symbol MACSX) returned an eye-popping 41.44%. All this by investing in bonds, convertible bonds and dividend paying common stocks in places like China, Hong Kong, India, Japan, Singapore, Malaysia, Taiwan, Thailand, South Korea and their newest addition, Vietnam. “Our beta is lower than our markets and we attract investors with a conservative outlook. The fund is not designed to shoot the lights out or capture all the growth in Asia,” explains Andrew Foster, the fund’s portfolio manager since 2005. Foster also helps manage Matthew’s India Fund, China Fund and Asia Pacific Equity Income Fund. “It will lag the benchmarks on the way up as well as down but it is designed to temper the declines in Asia.” That will come in handy in the years to come because although Foster believes the regions growth will far outpace that of the U.S. “these economies will remain volatile and some of these markets on the whole are as volatile as individual stocks in the U.S.” How volatile? In 2008, for example, while the S& P 500 Index fell 37%, the Asia Pacific Equity Index (ex-Japan) fell 52%, China dropped 51% and India lost...

Bruce Berkowitz—Domestic Fund Manager of the Year

It was no coincidence that we interviewed Bruce Berkowitz two weeks ago. The Fairholme Fund, which he manages, has been on my radar screen for the last few months. The fund is ranked by Lipper Analytical as one of their leaders over the last 3-and 5 year periods. In 2009, I noticed it was up over 41.48%, according to the company’s latest performance numbers on their website. Last year, although it was down 29%, the fund still managed to out perform its benchmark by 7%. Just this week, Morningstar, the premier mutual fund rating company, named Berkowitz the top U.S. mutual fund manager of the year. It couldn’t have happened to a smarter guy. Berkowitz and his staff work hard and they invest right along side their shareholders. “We eat our own cooking,” Berkowitz said from his offices in Miami, Florida. “I have every bit of my long-term investment money in the fund and I feel it’s important that everyone that works on the fund are shareholders as well.” That philosophy has proved to be a winning concept. The Fairholme team has generated roughly 13% annualized returns since its inception in December of 1999, according to the Fairholme Capital Management literature, which means it is up 236% compare to a 1.1% loss for the S&P 500 Index during the same time period. How, I asked, are they different from their competition? “Our tagline here is to ignore the crowd. We run toward while the crowd is running away from something,” he explained, “and we always keep a lot of cash on hand, about 15% on average.” That cash (which...

The Burkenroad Fund Hunts for value in the Deep South

Finding small cap value stocks is a difficult job in the best of times. When you deliberately limit your horizons to just six states, south of the Mason-Dixon Line, the odds get even longer. Yet, Hancock Horizon’s Burkenroad Fund continually ranks in the top ten percent of funds in its class, according to Lipper Associates. Here’s how they do it. “We look at book value to earnings, earnings surprise and revisions and relative strength,” explains David Lundgren, director of equities and research for this small cap value fund. Lundgren has over 19 years experience in investment and was named one of the top 100 mutual fund managers in the country in 2006. He also manages two other funds for Hancock Horizon, according to the company: a value and a growth fund. Although the Burkenroad fund was down 25% last year it managed to beat its benchmark, the Russell 2000 small cap index by 9%, according to Lundgren. This year he has reclaimed those losses and then some, he says. The fund confines its investments to Alabama, Florida, Georgia, Louisiana, Mississippi and Texas. On the surface, it would appear difficult to put together a track record of winners from that line-up, especially when competing with the internet age of high flying, low-priced, tech stocks. But Lundgren disagrees. “Most business investment is focused on both the East and West Coasts. So a lot of our companies go unnoticed and we’re pretty good at unearthing value here. We’ve had close to 25 of our stocks acquired over the last eight years while the rest continue to produce solid earnings. Over time, Wall...

It’s No Load or No Thanks

Mutual funds that charge investors sales charges, called loads, should never be a part of your investment portfolio. And yet, in just about every portfolio I have reviewed in the last six months, that’s practically all I’ve seen. It is clear to me that investors who have retained the services of financial consultants, brokers and investment advisors are getting royally shafted when it comes to paying for their services (and they don’t even know it!). “Well, he has to make a living, doesn’t he?” said one prospective client from North County who has been a long-time client of just such a manager. “Sure, but there’s a difference between making a ‘living’ and highway robbery,” I said. In my column “Mutual Fund Fees: Why should investors pay more than Institutions”, I revealed the unethical charges called 12b-1 fees. That’s the common practice among many advisors and brokers (including your own) of investing you in a mutual fund that will then kick back part of the expense each fund levees on shareholders. If, for example, The Unethical Investment Fund has a 1.00% fee, they will pay your advisor or planner a percentage of that as a commission for putting you into that particular fund and they will continue to do so for as long as you hold the fund. It is legal although it won’t show up in any of the statements they send to you every quarter. For many managers, we’re talking about a lot of extra fees each year that are coming out of your pocket; fees that are paid to the advisor, in addition to any management fee...

Don Yacktman , a Manager for all Markets

Don Yacktman, his son, Stephen, and Jason Subotky, all portfolio managers of the Yacktman Fund and it’s sister the Yacktman Focus Fund, are not sitting on their duffs just because their funds are up over 51% and 48% respectively so far this year, according to Morningstar. And just because Mr. Yacktman is a finalist in a very small group of five fund managers being considered as “domestic fund manager of the decade”, doesn’t mean much to this veteran manager with 40 years experience. What matters to Don and his crew are stocks; stocks trading at a good price, with a good business and boasting a management that has a long term track record in deploying cash. As value mangers, stocks like that are not easy to find, but when they do, they invest heavily. If the price drops, they buy even more. “We don’t want to have a Noah’s Ark approach to investing,” Mr. Yacktman explained, “the more one diversifies, the more your returns are going to approximate the returns of the S&P.” He argues that “having too many investments is a function of not having done your homework, because if one really has conviction, then you concentrate those investments.” Matching the S&P is not what Yacktman is about either. Both funds hold over 50% or more of their assets in their top ten holdings. How has that worked for him? “My joy comes from looking at our ten year numbers,” he said,” We actually experienced a lost decade where the S&P is down about 1%, including income, and our funds are up 11.7% compounded annually year after year....