This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Fund Company Dodge & Cox Regains Its Luster

Stocks in this article: DODGX DODFX DODBX

NEW YORK ( TheStreet ) -- Dodge & Cox is on a roll. During the past five years, all four of the company's stock mutual funds have landed in the top 10% of their Morningstar categories.

For the period, Dodge & Cox Stock (DODGX) returned 23% annually, outdoing the S&P 500 by more than 2 percentage points and topping 91% of large value funds. Dodge & Cox International (DODFX) returned 20% annually, surpassing 94% of foreign large blend funds.

The strong showing is particularly notable because the company's funds were clobbered during the financial crisis. Dodge & Cox Stock lost 43% in 2008, lagging 91% of peers. Dodge & Cox Balanced (DODBX) and Dodge & Cox International also finished in the bottom quarter of their categories. The disappointing results occurred because the portfolio managers placed big bets on unloved financial stocks. That proved to be the wrong move in a year when investors feared that banks would collapse.

Longtime shareholders should not have been surprised by the setbacks. Dodge & Cox has practiced a form of value investing that focuses on bold contrarian moves. The portfolio managers look for unloved companies that have the potential to bounce back. The current portfolio includes such controversial names as Nokia (NOK), the mobile phone maker that has been given up for dead by some Wall Street analysts. The out-of-favor names often keep sinking after Dodge & Cox buys them. Even the most successful holdings can struggle for years before they rebound. As a result, the funds can be out of sync with the markets.

Temporary disappointments do not deter the Dodge & Cox managers. When one of their holdings sinks, they often buy more shares. The goal is to own unloved stocks and wait years for them to recover. Many holdings have been in the portfolios for more than 10 years. Over the long term, the strategy has worked brilliantly. During the past 20 years, Dodge & Cox Stock returned 11% annually, topping the S&P 500 by more than 2 percentage points. The performance was particularly impressive because the mutual fund was much less volatile than the benchmark.

Unfortunately, many shareholders lack the patience to wait out the downturns. All too often investors poured into the funds just as they were peaking. The shareholders bailed as the returns were reaching a trough. That behavior is a recipe for obtaining miserable returns.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,416.85 +225.48 1.31%
S&P 500 2,021.25 +19.09 0.95%
NASDAQ 4,683.4070 +45.4130 0.98%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs