Value Funds for Mid-Cycle Gains

10/16/2014 9:00 am EST

Focus: FUNDS

Robert Carlson

Editor, Retirement Watch

Markets have become more volatile over the last few months; here's a pair of value funds we continue to recommend for "middle of the cycle" profits, explains Bob Carlson, fund expert and editor of Retirement Watch.

Dodge & Cox Stock (DODGX) is a classic value stock mutual fund; it is a no-load fund and has one of the lowest expense ratios among non-passive funds.

It's been around for many decades and maintained a consistent investment style—and superior results—through several management changes.

The fund focuses on large companies whose stocks appear to be selling at discounts. The fund concentrates on management's favorite stocks. It recently held only 72 stocks and had about one third of the fund invested in its ten largest holdings.

It also holds stocks for a long time. The turnover rate is only 15%. Of its largest holdings, the newest one is Microsoft (MSFT), which was initiated in 2011. It’s owned Wells Fargo & Co. (WFC) since 1985, Hewlett-Packard (HPQ) since 2001, and Capital One Financial (COF) since 2002.

GoodHaven (GOODX) is also a value stock fund focused primarily on the US that owns a small number of stocks (25) and concentrated in its ten largest holdings (47% of the fund).

Its top five positions are Hewlett-Packard (HPQ), Walter Investment Management (WAC), Spectrum Brands (SPB), Microsoft (MSFT), and Dundee Corp. (TSX: DC-A).

Like Dodge & Cox Stock, the fund has only a 12% turnover. But it hasn't been around for as long, opening only in 2011 after the managers left their roles as key analysts for Fairholme fund.

The fund will increase its cash holdings when not enough stocks meet its criteria. Recently, it was about 28% in cash. It will also invest beyond the largest companies. The fund is about 37% invested in mid-caps and 22% in small- and micro-caps.

The fund has lagged the S&P 500 (SPX) and Dodge & Cox Stock so far this year but should hold up better than the indices in a market decline and will surge if investors shift their preferences back to smaller companies.

Subscribe to Retirement Watch here…

More from

Dodge & Cox Global: For the Long Haul

Long-Term Value with Villere

Top Equity ETF? Schwab US Dividend

  By clicking submit, you agree to our privacy policy & terms of service.

Related Articles on FUNDS