collapse almost two years ago, we've become a lot happier with funds that stay in the black, rather than shoot to the moon. So let's find some.
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Big Screen Archive: Solid Funds and How They Fit Together
This week's Big Screen zeroes in on stock funds that have posted gains in each of the past 10 years, according to data from Chicago research house Morningstar. This type of streak seemed paltry back in 1999 when the average tech fund rocketed a stunning 136%, but it's downright sexy now with more than 800 U.S. stock funds under water and trailing bonds over the past three years. Still, you might think this is a low bar to clear, given that the Wilshire 5000 Total Stock Market Index only had three down years in the past decade.
But of the thousands of diversified U.S. stock funds out there, just 24 made the cut. We ranked them by their 10-year annualized gains and cobbled together a top 10 list. The preponderance of funds that use the value style and shop among small- and mid-cap stocks illustrate why there's room for more than big-cap growth funds in your portfolio. Let's look at some funds in our net and then consider some gems that barely missed the cut.
These stock funds have finished each of the past 10 calendar years in the black
|Source: Morningstar. Returns through Feb. 28
Funds that focus on small- and mid-cap stocks comprise eight of the 10 funds on our list. The quirky but solid-performing
fund, which focuses mainly on large- and mid-cap stocks based in and around the firm's home state of Minnesota, is our chart-topper.
Co-managers George Mairs and Bill Frels stick with stocks of companies where they see solid earnings growth potential. They typically stick with companies based in or near their state like
, because local companies are easier to monitor. The fund, which holds roughly 35 companies and does only modest trading, last had a down year in 1987 when it fell 2.4%. The fund has only had three down years over the past two decades and tops the
over the past one, three, five and 10 years. Mairs has held the reins since 1980 and will hand them over to Frels in a few years. Frels has deftly steered the firm's
fund for eight years.
Two other mid-cap funds on our list are the value-oriented
fund and the
fund, which blends the value and growth styles according to Morningstar's definitions.
The Longleaf fund, run by veterans Mason Hawkins and Staley Cates since 1987 and 1994, respectively, is firmly in the bargain-hunting value camp. Hawkins and Cates typically only buy shares of a company when they believe it's trading at least 40% below what they think it's worth and they tend to bet the farm on their picks, with just 20 to 25 stocks in the portfolio.
The Kaufmann fund, where co-managers Lawrence Auriana and Hans Utsch touted their "Tough Guys Finish First" slogan in myriad ads, favors the higher-priced stocks of small- and mid-cap companies with fast growth. The Longleaf fund's bargain-hunting style has fared better over the past 10 years, but both funds beat the S&P 500 over that stretch.
One caveat is the Kaufmann fund's high expenses. Since being purchased by Federated, the fund's 1.88% annual expense ratio hasn't come down. The fund's average peer's expenses are 1.54%.
Among the small-cap funds on our list we find
, run by
reigning stock fund manager of the year
and two funds run by small-cap specialist
, based in Salt Lake City.
Tillinghast, who has run the fund since its 1989 launch, shops for bargains among small-caps. He's topped the S&P 500 and his average peer over the past one, three, five and 10 years. That track record is only amplified when you consider that he runs the category's giant with some $14 billion in assets, compared to $345 million for its average peer. Big funds often have a tough time navigating the less liquid small-cap market without moving stock prices, but Tillinghast's broad portfolio hasn't sapped performance. That said, you might wonder if there's a manager out there who can do the same whenever Tillinghast decides to retire.
Both Wasatch funds on our list,
focus on stocks of companies with earnings growth between 15% and 25% per year. By not ignoring valuations, both funds have managed to keep pace with their peers in good times, while losing less in downturns. Both funds have topped the S&P 500 and the lion's share of their peers over the past decade. That said, both -- with a cumulative $2.1 billion in their coffers -- are closed to new investors.
Two other solid small-cap funds that made our cut, but didn't crack the top 10 are Longleaf's value oriented
fund and the
fund, which uses the growth style.
There are two big-cap funds on our list and both are bargain hunters:
The Dodge & Cox fund is a legend among value fans. An eight-member team, with all but one having at least 15 years at the helm, looks for cheap stocks of businesses trading below what they think they're worth. Over the past 30 years the fund has finished in the red just six times and it beats the S&P 500 over the past one, three, five and 10 years.
Larry Babin, manager of the Victory fund since its 1989 launch, takes a slightly more aggressive tack, but he's rung up solid results too. Babin looks for stocks in sectors he likes that are trading in the bottom half of their historical valuation range. Unlike many investors, he isn't afraid to dip a toe in the tech area, but he also spreads his bets to cut down on volatility. The fund hasn't had a down year yet.
The $49 billion
fund is another large-cap value fund that didn't crack our top 10, but deserves mention. Like most offerings from American Funds, assets are spread among a team of portfolio managers who pay close attention to valuations. Like most of the Los Angeles firm's offerings, this fund doesn't turn up at the top of the charts often, but you'll almost never find it among the losers either. Over the past 20 years its only down year was a 3.8% loss in 1990.
There you have it, a roster of funds with a knack for staying in the black.