Sleeper also owns high-yield municipal bond funds, such as Nuveen High Yield Municipal (NHMRX) , which yields 6.0%. For safety he has some high-grade funds including Vanguard GNMA (VFIIX), which holds government-backed issues.
Even conservative bond funds can lose money sometimes. To limit risks, Sleeper uses a stop-loss strategy. If any of the bond funds lose more than 2% or 3%, he sells and shifts to cash. The stop-loss approach kept the fund afloat in 2008. Sleeper concedes that his cautious strategy will lag the S&P 500 in a bull market, but he says clients are willing to forgo big gains. "Our clients typically are over 55, and they do not want much downside risk," he says.
Weitz Balanced aims to provide a steady ride by sticking with a mix of solid value stocks and high-quality fixed income. In 2008, the fund surpassed the S&P 500 by 11 percentage points. During the past five years, Weitz returned 5.4% annually.
Portfolio manager Bradley Hinton typically holds from 40% to 70% of assets in equities. In 2010, the fund had 60% of assets in stocks. But since then Hinton has lowered the stock allocation as prices have risen. Today he only has 46% of assets in stocks. "There are not a lot of compelling bargains around," he says.Hinton favors stocks that sell at 40% discounts to their fair values. To find cheap prices, he considers companies that appear to have problems. A favorite holding is Apache (APA), a producer of oil and gas. Hinton says that the stock is undervalued because the company has a big stake in Egyptian gas fields. Investors have been unnerved by the country's political uncertainty. Hinton says that most of the company's production is in the U.S. and other stable areas. While the stock currently trades for around $84, he says that the shares are worth $120, even without the Egyptian production. If the Egyptian fields operate smoothly, the shares would be worth $140.