Fidelity Focused Stock (FTQGX) has been a very strong performer. Stephen DuFour has managed Fidelity...
Long-Haul Fund Favorites
04/11/2014 9:00 am EST
Investors often have problems with timing and emotion; below, I’ll share some ideas for funds that you can hold through the long-haul, suggests contrarian investing expert Russel Kinnel in Morningstar Mutual Fund Investor.
To find funds that will make an ideal long-term match, look for those with relatively low Morningstar Risk ratings. Here are some funds with modest volatility and outstanding Morningstar Investor Returns.
Berwyn Income (US:BERIX) is remarkably dull. With just 25% of assets in equities most years, the fund rarely has extreme performance. It lost just 10.1% in 2008 (its typical competitor lost almost 19%), and usually, it has single-digit positive returns.
Assets are spread among dividend-paying stocks, cash, preferreds, convertible bonds, corporate bonds, and Treasuries. The fund has consistently produced top-quartile five-year returns, and that’s kept investors on board.
Conestoga Small Cap (US:CCASX) provides some welcome moderation in a volatile category—small growth. Management looks for companies with strong franchises and robust returns on equity, as well as little debt. It’s a conservative strategy that has kept the fund out of trouble most of the time.
Although co-manager William Martindale is winding down his contributions to the fund—he plans to retire later this summer—we have confidence in the rest of the team.
Mairs & Power Balanced (US:MAPOX) combines high quality dividend-paying stocks with a plain-vanilla investment-grade bond sleeve.
You can see that moderation in past performance. It lost a modest 21.1% in 2008 but also had a moderate 21.3% gain in 2009. (The average moderate-allocation fund dropped 28.0% and rose 24.1% in those two years, respectively.) This fund has flown below the radar with just $570 million in assets.
Vanguard Dividend Growth (US:VDIGX) has done well for shareholders with its fairly straightforward strategy: Buy strong companies with the potential for raising dividends and hold on.
That leads manager Don Kilbride to companies with low debt because you can’t raise dividends if you are up to your eyeballs in debt.
That, combined with dividends, means this fund invests in a fairly stout group of companies. As with any all-stock fund, though, this fund will lose money in most bear markets.
Manning & Napier Pro-Blend Moderate Term (US:EXBAX) has a boring portfolio to go with its boring name. This Gold-rated dullard has just under half its assets in equities today, though it has latitude to move that allocation to between 20% and 60% of the portfolio.
It has been a nice steady performer with 10- and 15-year returns in the top decibel of its peer group, and the same is true for its investor returns.
T. Rowe Price Diversified Small-Cap Growth (US:PRDSX) moderates risk by diversifying into more names than most small-growth funds.
Sudhir Nanda runs a quantitative strategy that emphasizes price/cash flow, earnings quality, and capital allocation.
Those are fairly conservative measures for a quant fund, and they served it well in the 2007–09 maelstrom that caused many a quant fund to short circuit.
Since Nanda took over in 2006, the fund has outperformed its peers in every calendar year. In 2008, it lost 36%—that’s not pretty, but it still tops 85% of small-growth funds. This fund has been a pleasant surprise.
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