Last month we purchased Fidelity Limited Term Bond (FJRLX) in our model portfolio. Part of our strat...
This Fund Gets a Gold Star
07/01/2013 7:00 am EST
Russel Kinnel of Morningstar FundInvestor rates this fund highly, based on its manager's contrarian and 'safe' strategy that has produced excellent results.
Even with a more limited palette, FPA Crescent (FPACX) paints a promising picture.
The fund has achieved great returns and has gotten noticed. Since its 1993 inception through May 31, this fund's 11% annualized gain beats all comers in the moderate-allocation category.
Furthermore, the fund—whose stated aim is to deliver equity-like returns without the attendant volatility—has bested about 90% of domestic stock funds in that time, while losing less than most stock and allocation funds in down markets, such as 2002, 2008, and 2011.
That's attracted investors scarred by this century's bear markets. Assets in the fund have swelled from around $1 billion in 2008 to nearly $12 billion.
Success has its downside. The fund's heavier asset load limits its ability to invest as much in small- and mid-cap stocks, which helped its past performance. The fund needs a larger share of average daily trading volume to build a smaller average position size in small- and mid-caps than it did in 2007, shortly before it fully reopened to investors.
At the end of 2007, the fund's average small- and mid-cap long position of 1.30% typically required less than a day of trading volume. Recently, its average small- and mid-cap long position of 0.91% needed about three days' volume.
That limitation need not be a handicap, though. Steve Romick, the manager here since inception, is an omnivorous contrarian who has demonstrated over two decades that he can sniff out value among stocks of all sizes and bonds of varying credit quality. His advantage is patiently waiting for value to emerge, and then deploying accumulated cash dispassionately when and where it does.
The market cap of the securities that he invests in matters less than his insistence on a margin of safety, and there is no sign of compromise on that front. Indeed, the fund has nearly a third of the portfolio in cash, because Romick says attractive opportunities have diminished as stocks have risen and bond yields have fallen.
That will change eventually. When it does, Romick now has a larger team to help sift for bargains. This fund is ready for what comes next.
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