OK, so my mailbox is not nearly as full as
, but it seems I certainly struck a nerve with my last column,
Family Feud: Deciding When to Sell a Fund. A lot of households apparently are asking the same question that my husband and I debated at the end of the quarter: When do you pitch a low-performer (unfortunately, sometimes a no-performer) from your portfolio? In our case, the debate was over Marty Whitman's
Third Avenue Value fund.
There's no black-and-white answer. Remember, investing is an art, not a science, especially when it comes to selling. But here are some of your thoughts on a subject that is sure to continue to be a hot one:
It's nice to know you go through what we go through. I thought small-caps were going to make a play in the first month of this year and got into Ralph Wanger's (ACRNX) - Get Report Acorn fund. Good numbers long term, but as we all know, small-caps did not participate this quarter. So, it has a small negative return for the quarter, but the manager is still there, very conservative. Conclusion: still holding, too. -- Nancy Chin-Wagner
Yes, Nancy, like Marty Whitman at Third Avenue Value, Ralph Wanger and his colleagues at Acorn are also good examples of experienced managers with great long-term records who have been left behind in this large-cap, Internet-loving market. They look for bargains and often make it their business to go against the grain.
But a couple of things to consider: Acorn really is much more a mid-cap than small-cap vehicle these days. It's a huge fund, which makes it hard for the management team to chase only tiny stocks. So if you really want to bet on small-caps, you may want to supplement this holding. Keep a close eye on Acorn's ranking among its peers. Year to date, better than 70% of similar funds are outperforming it, according to
. In 1998, a 6% return put it in the bottom fifth of the mid-cap growth category. Acorn's survived other tough times before, but this is something to watch.
Enjoyed your column as usual. Tell your husband when Microsoft (MSFT) - Get Report went public, it fell from its public offering price of 24 to 16! It stayed there for about three months. And many analysts did not think it was that good a company. -- Denis Fong
Thanks for the piece on Third Avenue Value. We have a decent amount of client money in both Value and (TASCX) - Get Report Small-Cap, and it hasn't been easy watching these funds drag down the portfolios. Alas, it is hard to imagine that Value will not come back; in fact, I really have no doubt it will. What is especially frustrating, though, is seeing others bail, forcing the manager to sell, further knocking these stocks down. It is hard enough putting a portfolio together, but factoring in what other investors will do just adds another level of complexity. -- Joseph Reeves
Indeed, Joseph, especially when many of those investors are daytraders, who measure their time horizon in minutes rather than years!
I think the whole investment arena has changed. The Boomers are big-cap and the X-ers are quick and fast. There will come a time for value and a time for small-cap, but as my mother always told me, "Son, you gotta make hay while the sun shines." -- Branson Willis
On the one hand,
Given that I was considering the Third Avenue Fund for my Roth, your article was timely. It would seem now would be a good time to buy! -- John Richardson
And on the other,
As a former four-year client of Marty Whitman's firm with a small portion of my capital, I have felt the ravages of an inappropriate investment stance the last couple years with him. My broker left in January, and I followed him out the door. Clearly he has been ambushed by the segmented market, but I feel a number of his problems have related to Curtis Jensen's (Whitman's heir apparent) small-tech strategies. Also Marty got carried away with his own publicity and got too cocky and into some precariously illiquid positions. -- Jim Woodcock
Got a few chuckles from your article. It's so heartening to hear of other investors bailing out too soon, only to see the value of the stock/fund skyrocket afterward. I thought I was the only one who could do that! -- Doug House
No way, Doug, that's a very common "talent" these days.
And last but definitely not least:
I think you were too tough on your husband. My wife is the controller of a billion-dollar company, and sometimes, well, I like to be the man in the house. You hang out with many, many ultra-successful men, and maybe it bothers your hubby. Next time, let him wear the pants in the family and if he thinks it's time to dump something, do it. Anyway, go have a ride on your Harley and forget the investment world. -- Joe Cunningham
Appreciate the last advice, Joe, although it will be awfully hard to get on my bike if only my hubby gets to wear pants in my family.
Thanks for all your comments everybody, and keep writing!
Brenda Buttner's column, Under the Hood, appears Thursdays. At time of publication, Buttner owned shares of the Third Avenue Value fund, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks or funds. While she cannot provide investment advice or recommendations, Buttner appreciates your feedback at TSCBrenda@aol.com.