Talking Value With Tweedy's Bob Wyckoff

The more money that flows into a mutual fund, the more fees the fund company gets. That's why it's surprising when firms close funds that are beating their benchmarks.

In the case of deep value shop Tweedy Browne, this Wednesday the managers are shuttering their signature (TBGVX Quote)Tweedy Browne Global Value and (TWEBX Quote)Tweedy Browne American Value funds to new investors.

They're doing this even though the $6.7 billion global fund is up 2.62% this year, 5.5 percentage points ahead of the MSCI EAFE index, and the $660 million American fund is down 4.61%, 41 basis points ahead of the S&P 500.

Why close funds that are doing so well? In this case, Tweedy says it's making the move simply because stocks are "fully valued."

Bob Wyckoff, one of Tweedy's five managing directors, discussed the firm's thinking with TheStreet.com. He also let us know what it would take to open the funds to the public again.

What's behind the decision to close your funds?

The reason is that it's getting tougher and tougher to find stocks that qualify with our rigorous valuation criteria. Since the bursting of the tech bubble, a lot of the money that was in tech and telecom has shifted into "old economy," or value, stocks. The result has been that the formerly high-priced stocks got cheaper and the previously low-priced stocks became more expensive.

Today there is a compression of valuation in the marketplace, which means there is not a big difference between higher priced growth and the so-called value stocks. The compression has occurred at a valuation level that is not insane, just full from our point of view.

What P/E levels are you talking about? What do you mean by full?

Everybody has their own valuation levels. But back in 2000 when the bubble burst, the median P/E for the S&P was around 13. The median means that if you rank the 500 stocks and pick the one in the middle, it would have a P/E of 13 or 14.