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Six intriguing funds Morningstar.com is covering now By Russel Kinnel
http://www.JewishWorldReview.com |
(KRT)
At Morningstar, we cover 2,000 mutual funds with Fund Analyst
Reports, and we're always looking for interesting offerings to add
to coverage. Some of the recent additions to our coverage list are
fairly new funds, while others have been around for a while but have
done something lately to catch our attention.
Here's a sampling of the most interesting funds that we've placed
under analyst coverage recently.
Despite the "me-too" sounding name, this fund has a fair amount
going for it. It's run by Tom Laming and James McBride, who had a
rather ugly divorce from Kornitzer Capital two years ago. Kornitzer
runs the successful Buffalo Small Cap (BUFSX), and Laming and
McBride are running this fund in a similar fashion. They combine a
top-down approach with a bottom-up, growth-at-a-reasonable-price
strategy. So far the fund has outperformed its category by a nice
margin. Morningstar analyst Gareth Lyons notes that he's also
encouraged that this fund plans to close to new investors at the
small size of just $400 million. The fund has $189 million in assets
at the moment.
As analyst Karen Papalois notes, this fund is a real hidden gem. It
has pretty much everything you want in a mutual fund. A good,
experienced manager, a small asset base and reasonable expenses.
Manager Arnie Schneider III left Wellington about 10 years ago to
set up his own firm. Using a deep-value strategy he has put up
strong results in separate accounts, and he's done the same in the
two years and 11 months that this fund has been open for business.
With an expense ratio of just 0.85 percent, this is the bargain of
the six new additions to our coverage list, though you need $20,000
to get into this club.
Yes, it's yet another variation on Royce's small-value strategy.
Royce reminds me of the way in which Taco Bell is always coming up
with a new name for the same combination of beef, salsa and cheese
in a tortilla. So, let's call this Royce's gordita. It distinguishes
itself by having a slightly higher upper band of market caps. It
goes after stocks between $600 million and $5 billion.
However, so far the fund has had most of its assets in small caps,
just like 15 other Royce funds. But it could go into mid-caps at any
moment! Also, this fund tends to hold about 60 stocks, making it
more concentrated than a gaggle of Royce funds. Analyst Todd Trubey
writes that managers Whitney George and Jay Kaplan hew to the
typical Royce strategy of "finding firms that have strong balance
sheets, solid growth prospects, and good valuations."
What stands out here is performance. The fund's concentration of
holdings and small asset base has supercharged returns in both
directions. The fund got clocked in 2002 but rebounded to produce
stellar returns since. It's not uncommon for the smaller funds in
the Royce stable to enjoy strong returns, but the downside is those
returns usually mean a fund won't stay small for long.
Low money market yields have sent investors searching for bond funds
that can stand in for money markets, and many have alighted upon
this fund. With a duration of just under half a year, this fund is
only taking on a touch of interest-rate risk in exchange for higher
yields than you'd see in a Treasury bill. Although that sounds
mundane, the fund's assets have soared to about $6 billion.
Unfortunately, that hasn't led to a lower expense ratio, as the fund
still charges a pricey 0.60 percent. You can find cheaper
ultrashort-term bond funds out there.
With a name like that, it's got to be good. Hiding behind that bland
moniker and equally pedestrian long-term performance record is an
intriguing fund. Nuveen changed horses in October 2002 when it
switched the fund over to NWQ Investment Management. Lead manager
Paul Hechmer has installed a bold value strategy, and early results
have been encouraging.
Senior analyst Bill Rocco writes that "Hechmer and his team look for
companies that are undervalued on a variety of metrics, enjoy strong
franchises, and have catalysts for improvement such as new
management or restructuring plans." NWQ runs a focused portfolio of
just 40 stocks. The fund's three-year returns rank in its category's
top 10 percent, though it's still pretty early. Now the bad news:
The fund charges a steep 1.75 percent. I'd wait until that came down
before buying.
This fund is exactly what the world of growth investing needs: a
concentrated, low-turnover strategy run by an experienced hand.
Fast-trading momentum funds led a lot of investors to their doom in
the bear market, so it's nice to see a fund that stays focused on
fundamentals. I like the fact that managers Frank Sands Sr., Frank
Sands Jr. and David Levanson invest with conviction, as evidenced by
the fact that they have more than 8 percent in top holding Genentech
(DNA). Although very few individual investors have discovered this
fund, institutional investors have more than $12 billion with Sands
Capital.
Russel Kinnel does not own shares in any of the securities
mentioned above. He is a writer for Morningstar.com
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