Fidelity Focused Stock (FTQGX) has been a very strong performer. Stephen DuFour has managed Fidelity...
Vanguard Energy: "A Lot to Like"
02/13/2017 9:00 am EST
Until OPEC’s recent production cuts, investors holding energy stocks were guaranteed to feel a certain amount of pain in recent years. But that pain was mitigated a bit for investors in Vanguard Energy Fund (VGENX), asserts Alyssa Lappen, editor of The Complete Investor.
For the three years ending December 12, the fund’s average annual loss of around 1.9 percent a year was 5.6 percent better than the average for the category’s 96 other funds.
And in 2016 (through December 12), as oil started to recover, the Vanguard fund generated a total return of nearly 35.1 percent, around 3.1 percent above the category average.
Much of Vanguard Energy’s impressive performance reflected the skill of its longtime manager Karl Bandtel of Wellington Management, which co-manages the fund. However, Bandtel retired at the end of June.
As always when there is a change at the top, it’s essential to assess the likely impact on the fund’s performance going forward.
The fund’s new manager is Gregory LeBlanc, who worked alongside Bandtel since late November 2015; he also manages institutional energy and commodities accounts and co-manages an energy hedge fund.
Morningstar apparently is taking a cautious approach to the change. It has downgraded the fund from Gold to Bronze for future prospects while maintaining its four-star rating for past performance.
For now we still see a lot to like in the fund and we’re keeping it in our fund portfolio. LeBlanc, who is a chartered financial analyst (CFA), should benefit from access to Vanguard colleagues.
In addition, Vanguard Energy fund enjoys a natural edge from its expense ratio of 0.37 percent, far lower than the average annual fees of 1.5 percent for other energy sector funds.
Vanguard Energy has significant exposure to large- and mega-caps. Around 27 percent of its assets are international, including more than 17 percent in Canada, the U.K., and France.
Turnover is fairly light at 23 percent, and the yield is 2 percent. The fund has an investment minimum of $3,000. Vanguard Energy Fund remains a recommendation.
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