Even Savvy Investors Can Learn From These Funds
Something bad is happening in these mad-rush-to-nowhere times. Summer is ending earlier every year.
U.S. schools and colleges aren’t even waiting for Labor Day to reopen any more. In my suburban town the teachers report back to work on Aug. 22, a month before the autumnal equinox.
That’s why I’m speaking up now, at this absurdly early date, to offer my back-to-school portfolio of mutual funds.
“Back-to-school” is no way to pick investments in real life. Any good fund should be a fund for all seasons. But hey, we live in a knowledge economy now, and we might learn something looking at funds with an educational connection.
Let’s put it in college look-book language: “the focus and values that a new generation can experience in a setting of research and mutual discovery.”
To follow that script, we start with the SunAmerica Focused Value Fund, a newcomer in the $27 billion SunAmerica Mutual Funds family of Los Angeles. Focused Value applies two trendy ideas multiple managers from other fund firms in a “focused” portfolio limited to 30 stocks or so to the recently untrendy style known as value investing, searching for bargains among overlooked companies.
Focused Value has returned 13.8 percent since it opened for business last fall, outdistancing the 1.5 percent return of the Standard & Poor’s 500 Index over the same span. Among its largest holdings: Columbia/HCA Healthcare Corp., Minnesota Mining & Manufacturing Co. and the semiconductor-equipment maker Silicon Valley Group Inc.
On the negative side, Focused Value is sold with sales charges of up to 5.75 percent. You could invest separately, at some extra trouble, in other funds run by its three managers without paying commissions.
Next on our list comes the Berger New Generation Fund in Denver, an aggressive growth fund with a taste for telecommunications, media, computer and software stocks. It has struggled this year, along with many other funds of its ilk, showing a year-to-date loss of 2.4 percent.
But it soared 144 percent in 1999, and boasts a three-year annualized return of 46 percent, which trounces the S & P; 500 by almost 30 percentage points. As long as we keep this fund in our backpack, our tech-savvy reputation should be safe around campus.
We also want “research” in our portfolio. Let’s go with the Putnam Research Fund, which Putnam Investments of Boston bills as the lowest-risk choice among the 14 growth-stock funds in its $300 billion fund family.
Putnam Research takes the egalitarian approach of buying stocks picked by the 40 or so analysts who do research for the whole Putnam organization. Its mixture of old-line blue chips and large growth stocks (e.g., General Electric Co., Intel Corp.) produced a 27.6 percent return in 1999 and a 2.9 percent gain so far in 2000.
Lastly, the phrase “mutual discovery” leads us straight to Franklin-Templeton’s Mutual Discovery Fund, one of the Mutual Series group. Under both retired founder Michael Price and his successors, the group has been famed for a go-it-alone value approach any campus rebel could relate to.
Mutual Discovery, riding out the departure of co-manager David Marcus in February for hedge-fund land, has been recovering nicely from lean times for most value funds in the late 1990s.
With a clutch of stocks that was more Europe (43 percent) than United States (32 percent) at last word, the fund is up 8.8 percent so far this year and 21 percent over the last 12 months.
You know, as we step back and examine that four-fund amalgam, it doesn’t look half bad. Some aggressive, some conservative. Some growth, some value. Some old, some new.
Most people might want to leaven the mixture with a bond or money market fund.
Our method of selecting this portfolio certainly isn’t Ph.D. stuff. But as a diversified package of stock funds, it might at least pass the entrance exam.
Chet Currier is a columnist for Bloomberg News.
