A "Masterful" Selection

03/10/2006 12:00 am EST

Focus:

Ken Kam

CEO, Marketocracy, Inc.

It is unusual when one of our top Money Show speakers recommends that you invest with another one of our favorites. But in this case, Mark Skousen is a fan of Ken Kam, and recommends that investors hold a position in the Masters 100 Fund. Here's his reasoning.

"Academic economists say that if you beat the market, you're either lucky or a liar. Well, Warren Buffett has beaten the market for 30 years and counting, showing that luck has little to do with it. Ken Kam, president of Marketocracy, searches the world of individual stock pickers seeking the top ‘Buffetts’ and then utilizes their stock picks for his no-load fund called the Masters 100 (MOFQX).

"Ken Kam searches the Internet by asking individual investors from anywhere in the world to create their own virtual mutual fund, and buy and sell stocks that trade on US markets. The top 100 performers are selected as the 100 Masters, who are rewarded financially for being on the list. So far, more than 50,000 individuals have tried their hand at beating the market. Few have succeeded. But maybe you are the one.

"Through modern technology, Ken monitors each fund, and then picks out the best stock pickers for both the long term and short term. All must be in compliance with the rules. Using an advanced proprietary formula, Ken has created the Masters 100 Fund and buys and sells stocks based on the abilities of these top stock pickers. Ken changes the mix of top performers every month, so there's quite a bit of turnover. Competition is fierce to stay on the top of the mountain.

"How well has the Masters 100 Fund performed? Since its inception in November 2001, the fund is up 60.4%. That's more than double the 25% the S&P 500 Index returned over the same period. However, there were periods where the Masters 100 Fund underperformed the market, especially in the first half of 2004. It forced Ken to reevaluate his model. He found that by selecting the top 10 Masters, his fund could do better a lot better. So now, the portfolio of the Masters 100 Fund is determined by the stock choices of his top 10 Masters.

"Since making this change in late April 2005, the Masters 100 Fund is beating the market by greater margins than before MOFQX is up 35.8%, while the S&P is up 12.2%. Even more amazing, the Masters 100 Fund has outperformed every sector by substantial margins. No matter what sector, the top 10 Masters do a better job than the market in selecting stocks. Right now, the Masters 100 Fund is overweighted in Consumer Discretionary, Energy, Healthcare, and Materials. I think it's time to consider the Masters 100 Fund. And yes, I'm an investor in the fund."

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