Last month we purchased Fidelity Limited Term Bond (FJRLX) in our model portfolio. Part of our strat...
Watching Wasatch: Small-Cap Growth
03/15/2016 9:00 am EST
People count, even in this age that places so much faith in impersonal algorithms and other forms of magical thinking, asserts Genia Turanova, editor of The Complete Investor.
When a mutual fund consistently outperforms other funds in the same category, it’s no accident: the fund’s manager deserves the credit. That’s why we’re so alert to any management changes in our funds.
Our latest fund to undergo a shifting of the guard is four-star and gold-rated Wasatch Small-Cap Growth fund (WAAEX).
Its solid long-term record has been compiled during the longtime leadership of Jeff Cardon, at the helm since the fund’s 1986 inception.
At the start of February, Cardon stepped down as head manager, with J.B. Taylor taking his place.
In this case, though, we see no reason for concern. For one thing, Cardon is staying on as co-manager. And Taylor is a seasoned pro as well; with the Wasatch fund family for 19 years and at Wasatch Small-Cap Growth for the past three.
Also reassuring is that the transition was announced well ahead of time, indicating the change was well thought through, not an ad hoc adjustment forced upon the company.
The fund’s guiding principles are that earnings growth drives stock prices and smaller companies can grow faster than large ones.
Not surprisingly, its portfolio’s P/E is on the high side — close to 30 at yearend — while estimated three-to-five-year earnings growth for its holdings also is high at 24 percent.
For the past 15-year period the fund ranks in the top 22 percent of the category.
It’s in the top 34 percent for the past 10-year stretch; top 39 percent for the past five-year period; top 68 percent for the past three-year period; and top 37 percent for the past year.
Of course we will watch closely to make sure the fund’s future performance matches up to past results.
But barring any sign of trouble, and as long as we think investors should own some small caps—and right now we do—the fund remains an excellent choice.
One slight negative is that new positions in the fund must be opened directly through the fund family. Wasatch Small-Cap Growth Fund is a buy.
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