Alexander's Admirable Trio
03/25/2005 12:00 am EST
"Most funds underperform the market, but we don’t own those funds," says Gary Alexander. "I want our funds that beat the market. Each of my favorite funds is a relatively small independent fund, managed by a team that I admire." Here's his top trio of picks.
"I believe we’ll see a few more bullish surprises in 2005, but we also have to keep one eye on the exit sign. I’m planning to lighten up on many of my stocks by year-end, moving to the three mutual funds that are proven bear-beaters. This bull market began on October 10, 2002, making it about 30 months old, which is fairly long in the tooth. Only three of the last eight bull markets were over three years, and this bull market will turn three in October. Over the last 40 years, the median bull market lasted just 33 months, and as of July 2005, this bull market will turn 33 months old.
"My bet is that this bull market will end sometime in late 2005, most likely in the third quarter. But don’t be overly concerned about the peak date. If history is any indication, the first declines from a new peak will be shallow and sporadic, giving you plenty of time to lighten up on your riskiest stocks. Meanwhile, here are the three funds that I expect to emphasize as we near an expected bull market peak later in the year.
"FPA Crescent Fund (FPACX ) is a balanced fund— investing in both stocks and bonds. The managers find a good company and then invest in its stock, bonds, preferred shares, and/or convertible bonds. Right now, the fund is over 50% in cash. That’s one reason that I intend to move more into this fund over the next year.
"The Al Frank Fund (VALUX) is a stock-only fund that has handily beaten the market every year except 2002, the worst year since 1974 (most of us lost money that year). But now, the same team has designed a dividend-oriented stock fund, Al Frank Dividend Fund (VALDX), which should beat the market in bad times, too. I plan to increase my emphasis on the Al Frank Dividend fund going into 2006
"Loomis Sayles Bond Fund (LSBRX) is a flexible bond fund that can alter its country risk, currency risk, or credit risk, by looking for the best bond investments around the world. I like their defensive value orientation, and I plan to move more into this fund in 2006 as well."