Royce Special: Persistency Pick

01/24/2003 12:00 am EST


Sheldon Jacobs

Author, Investing Without Wall Street, Five Essentials for Financial Freedom

Since 1991, The No-Load Fund Investor has offered a strategy called Persistency of Performance, which involved mechanically buying the prior year's top performing diversified no-load fund and holding it for one year. On average, these picks have gained 19.9% per year, compared to a 13.1% gain for the average diversified fund. Here's this year's pick from editor Sheldon Jacobs.

"We had to exercise a certain amount of discretion in choosing our Persistency of Performance selection for this year. We are ruling out sector and international funds. This year, we are also eliminating bear funds and market-neutral funds, both of which hold short positions. We do this because Persistency of Performance is a ‘real world’ strategy, in which investors place their hard-earned dollars, and we believe 2003 will be an up year for the market.

"Our selection this year is Royce Special Equity (RYSEX), a small-cap value fund that has done very well the last three years. Managed by Charles Dreifus for the past five years, the fund now has $394 million in assets, up from $219 million three months ago. The fund has 75 holdings with a median market cap of $520 million. The fund’s average price-to-earnings ratio is a low 13.4. The fund seeks conservatively financed and managed owner-operated (i.e. family-type) companies. Chuck Royce and his crew are as good as it gets investing in the small-cap value sector. If the market favors this sector this year, or even if it is neutral toward the sector, the fund should do fine."

Special note:  With his latest issue, Sheldon Jacobs has begun his 25th year of publishing The No-Load Fund Investor.  Meanwhile, The Hulbert Financial Digest has released his annual Honor Roll for newsletter performance and Sheldon's service was one of only six newsletters to make the list.  Says Mark Hulbert, "A significant exposure to bonds is responsible for his newsletter being the lowest risk of any of the six honor roll letters." Congratulations Sheldon!

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