Stick with the Winners

04/24/2007 12:00 am EST


Thurman Smith

Editor, Equity Fund Outlook

Thurman Smith, editor of Equity Fund Outlook, finds four funds which have different sizes and approaches but which have one thing in common: winning track records.

Despite assets of $5.6 billion, Janus Contrarian (JSVAX) continues to be one of the big movers among domestic diversified funds. Perhaps that’s because it has become almost a global fund.

Manager David Decker looks for firms of any size and country that he thinks have great future earnings potential and the ability to increase returns on invested capital. Its sixty-seven issues include jumbo-, large- and mid-cap firms. He often overweights his favorites.

Its Tax-Impact of 1.7 means that an investor in this fund in a taxable account would have given up 1.7 percentage points of the return each year to federal taxes at the 35% marginal rate based on distributions over the last two years. But considering the annualized return of 30.6% over this period, that is a subtraction that can be painlessly accommodated.

Micro-cap Perritt Emerging Opportunities (PREOX) is one of two open, small-cap funds in the EFO database with a buy rating (85 or higher). Over its two and a half years, Emerging Opportunities provided an annualized return of 20.1%, while the average small-cap value fund returned 16.3%. Yet its risk exposure is a comfortable 8.5. Its total net assets of $93 million are still small enough to follow its charter to invest in firms under $350 million in market capitalization at the time of purchase (up from the $250 million ceiling at launch).

The present average market cap is only $84 million, so manager Michael Corbett is still finding good very small firms. The portfolio is well diversified over 156 issues, and no single issue is over 2% of the portfolio.

With a yield of 7.9%, all-cap Alpine Dynamic Dividend Fund (ADVDX) is in a class by itself. It uses several aggressive tactics to milk cash from stocks. These include dividend timing, searching for growing firms with rising dividends, and capturing special dividend payouts.

Since its launch 3.5 years ago, its effective annual rate of return of 22.4% reflects the focus on small stocks manager Jill Evans emphasized in the early years. The average market cap is now mid-cap and a third of assets are in foreign stocks.

All-cap, concentrated Artisan Opportunistic Value (ARTLX) returned 20.9% over its first year, a favorable spread of 4.1 points over the average large-cap value fund. The last three months have been the best. A seasoned team of Scott Satterwhite, Kim Keiffer, and George Sertl elected to emphasize larger firms when they built the portfolio.

On average, their choices have worked well, though prospects at the outset were uncertain as their previous experience had been in small and mid-size stocks.

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