Who has had the most successful "general" stock fund over the past few years?
Nope. You've probably never heard of Kailash Birmiwal, or of his tiny
Birmiwal Oasis (BIRMX) fund. But Lipper and Morningstar say this obscure and mysterious fund is shooting out the lights.
Oasis opened for business only four years ago, but Lipper calculates that it has already turned $10,000 into $28,000. That's three times the profits you would have made in an
index fund over that period. Morningstar, which gives Oasis a five-star rating, believes the performance figure is even higher.
They are, incidentally, unable to explain the discrepancy. Birmiwal, who runs the fund, probably holds the answer, but he is hard to track down ... and when I finally reached him, he refused to be interviewed. Best guess: The fund hands back such a huge chunk of its profits to investors each year that this may be confusing the "total return" calculations.
Either way, both Lipper and Morningstar say the fund is a superstar. It's up another 9.24% already this year. Oasis, alas, closed to new investors in January of last year -- less than three years after opening.
Such apparent success inevitably piqued my interest. Birmiwal's refusal to talk made me even more intrigued. So I went hunting through the public filings to find out what I could. And they revealed a lot about the elements of successful investing. With apologies to Leo Tolstoy, every unhappy mutual fund is unhappy in its own way, while all happy mutual funds are alike.
The manager's name is on the door
. Kailash Birmiwal isn't trying to work his way up a career ladder in someone else's company. He's not playing office politics, covering his rear or answering to a committee every quarter. The company is his, and he's answerable to one group of people alone: the customers.
The manager is eating his own cooking
. Published biographical data says Birmiwal actually began his investment career running his personal stock portfolio. After a decade, he had been apparently been so successful that he opened a small fund to run some outside investors' money as well.
There is no guarantee that the two go hand in hand, but it's a reasonable conclusion to draw -- especially as the mutual fund is doing so well.
The manager has a free hand to invest where he wants.
Foreign, domestic, big companies, small companies, he goes wherever there's value. And he doesn't have to shop for the sake of shopping. As of Dec. 31, the fund's most recent filing, it had 20% of its assets in cash. He can also go short: Nearly 2% of the fund is betting on a fall in the Nasdaq 100 index.
The fund is concentrated
. A third of the money is invested in the top 10 holdings. Concentration makes returns more volatile, but if fund managers knows what they are doing, letting them make big bets where they are most confident should produce better returns over time. If they don't know what they are doing, they shouldn't be running a fund at all.
The manager plays to his forehand
. Birmiwal is a former professor of electrical engineering (at the University of Southern Illinois). And a review of his current stock holdings show a strong bias toward industries where a technical background would be an advantage. As of Dec. 31, his fund has 13% of its money in computer-chip makers, 8% in software and nearly 6% more in business and IT services. He also has large holdings in mining and chemicals.
The fund has stayed small and nimble
. In fact, at $20 million. it's
. And by closing it to new investors and paying out huge dividends each year, Birmiwal keeps it that way. Compare that with most mutual fund companies, which want their funds to be as big as possible, even if that dilutes returns.
Fees are linked to performance
. In a fund this small, fees are always going to be high as a percentage of net assets. They came to 3% in 2005, the last year for which we have data. But nearly half of those were linked to performance.
Birmiwal has one other feature I like. I have a theory -- so far it is purely anecdotal -- that
the further an investment manager is from Wall Street, the better it is likely to be
. Think Warren Buffett (Nebraska),
Dodge & Cox
(Memphis). The distance helps soundproof them from the day-to-day noise that is the enemy of a long-term investor.
Birmiwal Oasis is run from Bellevue, Wash. -- a suburb of Seattle.
Bottom line: Where is he putting his money right now?
Many of the holdings seem to be small, little-known leveraged plays on big trends.
As of Dec. 31, his top holding, representing 6% of total assets, was
, a play on the boom in LCD and other flat-panel displays, including TVs. ChipMOS, based in China, tests the computer chips that run those displays.
He had 5% in
, a play on the energy derivatives market. Optionable, a micro-cap that is traded over the counter, provides services to energy derivatives brokers, and it launched the OPEX electronic trading platform.
Birmiwal has 4.4% invested in
, a way to play the economic revolution in China. Bodisen, which
calls the 16th-fastest-growing company in China, is a manufacturer of environmentally friendly bio-fertilizer there. The stock's primary listing is in London.
Birmiwal also has 3.9% invested in
, a Korean developer of multiplayer, online role-playing games.
Other large stakes include Indian pharmaceutical
Dr. Reddy's Laboratories
, Argentine gold and copper miner
Northern Orion Resources
, which provides equipment and services for computer-chip makers.
In keeping with TSC's editorial policy, Brett Arends doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. Arends takes a critical look inside mutual funds and the personal finance industry in a twice-weekly column that ranges from investment advice for the general reader to the industry's latest scoop. Prior to joining TheStreet.com in 2006, he worked for more than two years at the Boston Herald, where he revived the paper's well-known 'On State Street' finance column and was part of a team that won two SABEW awards in 2005. He had previously written for the Daily Telegraph and Daily Mail newspapers in London, the magazine Private Eye, and for Global Agenda, the official magazine of the World Economic Summit in Davos, Switzerland. Arends has also written a book on sports 'futures' betting.