Balanced Buys for Stable Growth

Focus: FUNDS

Tom Sudyka, portfolio manager at the LK Balanced Fund, seeks stability and growth through a mix of bonds and quality stocks. Here, he looks at four favorite equities; a railroad, a media firm, a healthcare giant, and a leading technology outfit. 

Steven Halpern:  Our guest today is Tom Sudyka, portfolio manager of the LK Balanced Fund and president of Lawson Kroeker Investment Management.  How are you doing today, Tom?

Tom Sudyka:  I’m great, thank you.

Steven Halpern:  Well, thank you so much for joining us.  The LK Balanced Fund (LKBLX) has been a top performer over the past decade.  Can you tell our listeners a little about the fund and its long-term investment goals?  

Tom Sudyka: The LK Balanced Fund is a successor to a partnership that Lawson Kroeker ran—has run for 28 years now—and it’s a straightforward balanced product, and by balanced we mean it—at all times—it holds equities and fixed income securities.  

Historically, that balance has been targeted around a 60% equity, 40% bond target and it has vacillated somewhere between 50% and 70% equities over the past 28 years—currently sitting around 65% equities—because we think the equity markets offer better long-term potential today than maybe the fixed income side does.  

The long-term goal of the fund would be to provide stability of growth, but while providing growth—more stability than an all equity fund would have—of course.

Steven Halpern:  Now, given the market’s volatility, particularly the volatility in such areas as energy and some global challenges, I would think this is a particularly good time for investors to consider a balanced fund.  Would you agree with that?  

Tom Sudyka:  I would agree with that.  I mean, what’s going on in the equity markets today is largely macro driven.  As you mentioned, it’s oil prices falling to five year lows, and, as of today, at least, no end in sight, and that has created remarkable volatility.  

The fixed index is way up on the stock side, and while that goes on, obviously, the equity portion of a balanced fund has become somewhat more volatile, but the bond portion has that effect of dampening the volatility of the investor’s long-term holding.  

We think that by being in a balanced fund and letting the manger make the decision when to move money between stocks and bonds takes the risk element out for the individual investor and it keeps them invested better for the long-term.