Ah, the holidays. Time for turkey, day-after shopping -- and trying to outgun the
This year is shaping up to be better for active mutual fund managers than last. Through Tuesday's close, 42% of domestic equity funds were ahead of the S&P 500, according to
. For all of 1998, just 17.5% outperformed the index.
But some funds are on the bubble, a hair ahead or behind the benchmark. Their managers will spend December trying to finish above it.
Among them is the
Premier Equity fund, managed by Jeff Van Harte. His fund is returning 16.3% year to date through Wednesday's close, a mere 1 percentage point ahead of the S&P 500's 15.3% return.
For Van Harte, there's more on the line than just being able to print an index-busting return in his fund's prospectus. Since the fund was launched in late 1995, it has never underperformed the S&P 500 during a calendar year. And Van Harte doesn't seem thrilled about the possibility of it happening on his watch.
"If we don't have a good market, we may not make it. We'll just have to see," he sighs. "But I'm not going to go trading around to try to manufacture performance. One of the reasons we've done well over the years is that we haven't engaged in aggressive trading or flipping IPOs."
Van Harte's slow-but-steady style helped the fund achieve a 33.8% return in 1998, more than 5% better than the index that year. (Before Van Harte took it over in the first half of 1998, star manager Glen Bickerstaff ran the fund.)
A growth manager who casts his fund as more conservative than Transamerica's
Premier Small Company and
Premier Aggressive Growth funds, Van Harte divides his portfolio between fast-growing tech stocks and relatively more stable businesses like grocery-store chains and retailers.
The fund does take a concentrated approach, though, with 60% of its assets stuffed into its top-10 holdings, according to
, its largest holding, accounts for 8.2% of its $287 million in assets.
But the portfolio also includes older-economy companies like
Sodexho Marriott Services
alongside tech stalwarts
Problem is, 1999 has been about tech, tech and more tech, not grocery stores and food-services companies.
"I feel like I've been 50% in cash and 50% in high growth, because the lower-multiple names have been flat to down, and the higher-growth and technology stocks have been the place to be," Van Harte says. "One-half of our portfolio is up about 35% and the other half is flat. When you take them together, that's how you get the return we're showing this year."
And some stocks, like health care supply management company
, have taken it on the chin this year. Van Harte owned the stock earlier this year when the company swooned on
news of accounting irregularities. It's no longer in the fund's portfolio, according to Morningstar.
So how does Van Harte plan on making sure his fund's perfect S&P-beating record doesn't become blemished this year? Well, it's all in what you buy, and Van Harte's bets lately have been paying off. Nearly half of the fund's year-to-date return has come since the end of October.
A lot of it has come from wireless stocks. One of Van Harte's recent picks has been
, the San Diego-based maker of cell-phone standards technology that is every momentum investor's darling. Van Harte believes in Qualcomm for the long haul because the company
controls the CDMA cell-phone standard.
"That was a nice one for us. We got in on a cost basis in the low 200s," Van Harte says. The stock closed at 375 5/16 Wednesday.
Another recent pick has been
RF Micro Devices
, a Greensboro, N.C., maker of internal components for cellular phones and pagers.
"We sort of think they've got a chance to be a mini-Intel in this particular skill set," Van Harte says. "It's a smaller position in the fund, but it's done pretty well. You've got to look for some of the early-stage ideas because you can't just always rely on stuff that's already recognized."
RF Micro Devices, which Van Harte says he purchased in the low 40s, closed at 70 1/16 Wednesday. It has a market cap of $5.4 billion.
As for actually coming out ahead of the S&P 500 for the year, Van Harte's not making any promises.
On Tuesday, Van Harte's fund was trailing the S&P 500 by a little over 1 percentage point. But the Nasdaq's 77.6-point rise on Wednesday fueled a 2-percentage-point rise in the fund's 1999 return, vaulting it past the benchmark.
"There's still a month to go in the year, so, when you're fairly concentrated, one week can make your performance for the year."
Or kill it. He's got five weeks left for trying.