Remember gulping that final, totally unnecessary slice of pumpkin pie last Thanksgiving? That's how stuffed your portfolio might be with tech stocks these days.
Aiming to capitalize on the sector's hot performance, fund companies have launched tech funds in record droves and investors have stuffed money into the mercurial fare faster than ever. What many investors didn't realize -- until they saw their accounts tumble with the sector in the second quarter -- is that they already had a significant overweighting in tech. Consider that the
growth fund already has some 45% of its assets invested in tech stocks, compared with 31.8% for the benchmark
This week, a reader requested that Big Screen uncover "some mutual funds for those of us who find ourselves overloaded in technology." Like many investors, he doesn't want to sell his tech-heavy funds and run up a huge tax bill. Rather, he wants to balance out his portfolio by putting fresh cash to work in solid funds that are lighter on tech.
So, this week's Big Screen sifts through large-cap
value funds for those where a manager has beaten at least 75% of his or her peers since Jan. 1 and over the last three years, while having a tech-stock weighting of 20% or less. That turned up seven funds, and they're ranked by year-to-date return in the table below.
We've picked value funds because value managers, who essentially hunt for bargains in the stock market, typically have modest tech-stock weightings.
Some names on our list you know, but most you probably don't. We'll pick a trio of intriguing options from our list and highlight a couple of others that missed the cut, but might be a good choice for investors with a tech overdose.
Clipper jumps out at me because, a year ago, everyone was talking about how stupid they were even after 15 years of great performance. Now they're back, which proves you have to be patient," says
senior analyst Scott Cooley.
James Gipson and Michael Sandler have run the
no-load fund since 1984 and Bruce Veaco joined them in 1986. The three managers have a strict approach, investing only in 20 to 25 stocks that they believe are selling at least 30% below what they think they're worth. When they don't find enough ideas, they leave their money in cash or buy bonds.
That purist and concentrated approach, which has led them to low-tech picks like
, can lead to feast or famine returns in the short term, but it's tough to fault their long-term results. The fund, which held no tech stocks on March 31, has beaten its average peer over the past one-, three-, five- and 10-year periods, according to Morningstar. Its 16.5% 10-year annualized return beats a cool 94% of its peers.
Another intriguing, unheralded fund on our list is
Gabelli Westwood Equity. Lead manager Susan Byrne and Kellie Stark have run the fund since its 1994 inception. Byrne looks for undervalued companies in fast-growing sectors, paying particular attention to companies with positive earnings surprises. That approach led the fund to an overweighting in energy and retail stocks at the end of the first quarter and a modest 16% tech-stock weighting.
It has also led to solid performance. The fund, which has both
load and no-load share classes, tops 85% of its peers over the past one-, three- and five-year periods. Its 20.7% five-year annualized return beats 89% of its
large-cap value peers, according to Morningstar.
Another sleeper is broker-sold
Smith Barney Fundamental Value, run by John Goode since 1990.
"John Goode is an example of a manager with a great record that most people know about," says Cooley.
Like his peers, Goode shops for bargains among battered stocks, but his fund looks a bit techier than others. Although its tech weighting was just 18% on May 31,
were all among the fund's top-five holdings. That said, two big sector bets were on energy stocks and financial stocks, two core sectors for classic value investors.
Few value managers can equal Goode's results over the past decade. Some 90% of his peers trail his fund over the last one-, three-, five- and 10-year periods. The fund's 17.2% 10-year annualized return beats 94% of peers.
No screen neatly unearths all the best options out there, so Cooley adds three more funds to the list: no-load
Dodge & Cox Stock and broker-sold
Each fund has a solid manager at the helm (Bill Nygren and Kevin Grant took over Oakmark in March, with a modest tech weighting). The trio isn't beating 75% of their peers since Jan. 1, but each is at least worth a long look if you're eager to find solid funds that are light on tech.