Fund Notebook: Barrow 'Sprinkles' New Ideas into Vanguard Selected Value

Also: New tools for sifting fund data.
Publish date:

Forget about the grand reopening this summer of Vanguard's

(VWNDX) - Get Report

Windsor fund. Investors impressed with the Windsor legacy should keep an eye on another Vanguard fund,

(VASVX) - Get Report

Selected Value.

James Barrow, the against-all-odds value manager who has made Vanguard's

(VWNFX) - Get Report

Windsor II stand tall above the original Windsor, took over the fund about a month ago, replacing managers Jim McClure and Jim Harloe. Look for Barrow to apply his winning Windsor II style to the mid-cap sector, where Selected Value plays.

The large-cap Windsor II has assets of $31.7 billion while Selected Value is much smaller at $130.2 million. Both funds focus on value stocks, a sector that has been out of favor lately. At Windsor II, "there are a lot of companies that we run across that are really too small for it," says Barrow. Those are companies he says he'll "sprinkle" into Selected Value.

Among them are

Toys R Us




(WEN) - Get Report

and oil and gas exploration firm



. All were recently added to Selected Value.

Barrow says he has repositioned 60% to 65% of the portfolio since taking it over just four weeks ago.

One company he inherited that he's holding on to is

Harnischfeger Industries


, the Wisconsin paper-machinery maker that's the subject of takeover rumors.

Through Thursday's close, the company's stock was up 72.6% since March 24. However, the stock is down almost that much since last June, when the bottom started falling out of the paper-making equipment business.

"I didn't get rid of everything, and Harnischfeger was kind of hard to get out of," says Barrow. "It was lying there at $6 and not trading very well." The stock was up more than 9.5% by midday Friday, trading at 9 15/16.

Barrow is a value manager's value manager, and he muses about seemingly forgotten concepts like low price-to-earnings ratios, low price-to-book ratios and high current yields in his slow Texas drawl. Since its inception in 1985, Barrow has piloted Windsor II to a 16.5% annualized return. That outpaces both the original Windsor and the

S&P 500

for the same time period. Selected Value has gained just 4.3% since its 1996 inception -- and that's not an annualized figure.

Newsletter editor and Vanguard watcher Dan Wiener likes Barrow's succession to the helm of this fund.

"It may not happen tomorrow, and it may not happen next month, but I think you're going to see that fund really begin to move," says Wiener, who edits the

Independent Adviser for Vanguard Investors

and who has an uncanny

knack for calling Vanguard moves. He correctly surmised in the current issue of his newsletter that Barrow would buy Toys R Us, Wendy's and Kerr-McGee.

"A lot of investors will not take a chance on this fund because they're going to only look at the historical track record -- and that's gone straight out the window at this point," says Wiener. "But as far as I'm concerned, the record starts with Jim Barrow."

Tools for Fund Freaks

There are a couple of new Web resources available for sifting, slicing and dicing mutual fund information.

In the past few months, readers have asked the

TSC Fund Forum for advice on finding funds that own their favorite stocks. Now there's a ready-made tool on the Web that will do just that. You can find it at

This site lets you build a list of favorite -- or not-so-favorite -- stocks. It then searches through data from




to find funds with the closest matches. Building your list of stocks is a little clunky, but it's a lot less tedious than searching through lists of funds' stock holdings.

The searches can be a bit broad, as well. For instance, entering 10 tech names to see which funds might appear yielded

(MNNAX) - Get Report

Munder NetNet, a Internet fund, high on the list. But the search also turned up the

(VTSMX) - Get Report

Vanguard Total Stock Market fund -- which was a little more diversified than what we were looking for.

Another fund tool is actually blessed by the

Securities and Exchange Commission.

The SEC's new

Mutual Fund Cost Calculator is designed to help investors figure out how much of their investment is actually working for them -- and how much is being gobbled up by fees and other costs.

For example, the calculator will tell you that if you invested $10,000 in

(VFINX) - Get Report

Vanguard Index 500 fund -- the largest fund still open to new investors -- and held onto it for 10 years, you'd end up paying $555 dollars in fees. That's assuming a 12% return, the average S&P 500 return over the past 30 years.

One problem with the gizmo is you've got to estimate a fund's return to get an estimate of the fund's costs. If you can predict future returns, give us a call. But since the fund industry has reluctant to include on individual statements the actual dollar amounts shareholders pay in costs, the SEC's calculator might be the next best thing.

Yet another calculator can help you make sense of the alphabet soup of multiple mutual fund share classes.


Morningstar Share Class Calculator lets you look at how different share classes influence a fund's return.

For instance, look at a hypothetical $5,000 investment in

(MFEGX) - Get Report

MFS Emerging Growth fund, which has four share classes. The calculator found that after 10 years of holding the fund in an IRA, an investor would make $1,050 more in the I Shares than in the C Shares.

The difference comes from the fee structure. The I shares carry an expense ratio of 0.91%, while the C shares have an expense ratio of 1.91% and an annual 1% sales charge.