Last month we purchased Fidelity Limited Term Bond (FJRLX) in our model portfolio. Part of our strat...
Fund Favorites for Value Investors
03/24/2016 9:00 am EST
Value investing comes in many forms, but the goal is the same:& buy high-quality stocks at a discount and reap the rewards when share prices rebound, explains Tim Begany of Personal Finance.
Yes, value strategies have lagged for some time, but every study of historical market returns show they triumph in the long run.
They can also reduce portfolio risk because value stocks tend to be relatively cheap, so they don’t fall as far when the broader market tanks.
Our small value pick, T. Rowe Price Small-Cap Value (PRSVX), is putting a bout of underperformance behind it under new lead manager David Wagner, who took over in June 2014.
The turnaround has taken some time, but the fund is once again a standout, outpacing 90% of peers over the past 12 months.
Wagner is sparing shareholders the extra pain by treading lightly in the troubled energy and raw materials sectors, though we see him beefing up in those areas once the dust settles.
Fidelity Mid Cap Value (FSMVX) is also thriving under a relatively new manager, Court Dignan, who assumed command a few years ago after a decade as a Fidelity analyst.
He does things a bit differently than his predecessor, and it’s paying off. The fund returned an average annual 6.6% the past three years, beating 88% of the mid-cap value category.
Dignan buys mid-caps that look cheap relative to a host of variables such as the value of their business assets. He’s also taking more of a buy-and-hold approach and placing a heavier emphasis on reliable dividend payers.
In the large-cap value space, Dodge & Cox Stock (DODGX) makes bold calls and sticks with them, typically owning a relatively small number of stocks (currently 65) and replacing only 18% of the portfolio each year.
The managers often seek value in quality large caps that have fallen on hard times. Riskier contrarian picks like these don’t always pan out. However, the fund consistently rewards patient long-term investors.
The past five years, it beat 62% of the large-cap value category by gaining 8.6% annually. Its 15-year track record, with an average annual return of 6.2%, surpasses 92% of peers.
By Tim Begany in Personal Finance
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