The Fantastic 48
- Must beat the fund’s benchmark since the start date of the longest-tenured manager
- Must have expense ratios in the cheapest quintile of the category
- Must have a manager who has run the fund for at least five years.
- Must have a Morningstar Analyst Rating of Bronze or better
- Must have a positive Parent rating
- Must have at least one manager with at least $500,000 or more invested
- Must have overall Morningstar Risk that is not High
- Must not be limited to institutional investors
This is a nice little conservative-allocation fund that keeps on chugging along. It can’t have more than 30% in stocks, yet it has been a respectable performer in the recent rally thanks to a corporate-bond stake and some good stock selection. Management buys stocks of dividend-payers with solid balance sheets as well as corporate bonds, convertibles, and preferred stocks. Thus, it’s worth noting the fund does take on some credit risk.
Dodge & Cox has a quartet of champs to make it through the screens: Dodge & Cox Global Stock (DODWX), Dodge & Cox Income (DODIX), Dodge & Cox International Stock (DODFX), and Dodge & Cox Stock (DODGX). Low costs, stable management, and a consistent style have worked wonderfully for Dodge. True, its stock funds got smacked in 2008, but they held up well in the earlier bear market and have regained their footing since 2008. They’re just great long-term holdings.
Fidelity landed three funds in the 48. Will Danoff continues to amaze me at Fidelity Contrafund (FCNTX). He continues to deliver great returns without extreme risks. You might not have noticed Fidelity Capital Appreciation (FDCAX), though. It’s definitely at the high-risk end, as Fergus Shiel is something of a fast-trading omnivore.
Keep an eye out for the day this Silver-rated fund reopens. Managers Dennis Bryan and Arik Ahitov want strong companies trading at modest valuations. It’s not easy to find many companies like that, and that’s why the fund has a big cash stake and is closed to new investors. The fund offers a nice way to get exposure to stocks while still playing defense.
Franklin Income is a little like Berwyn Income, only on a much grander scale. This allocation fund also courts a fair amount of credit risk, only it does so with a massive $93 billion asset base. The fund’s sizable yield and strong performance in the rally have made it extremely popular. Remember, though, that yield requires credit risk, and there’s a price to be paid in years like 2008.
Harbor Capital Appreciation (HACAX) and Harbor International (HAINX) are cheapest when you buy them directly from Harbor with a minimum of $50,000, but you can also buy slightly pricier share classes for $2,500 from fund supermarkets.
LKCM Equity (LKEQX) and LKCM Small Cap Equity (LKSCX) are good below-the-radar funds run out of Fort Worth, Texas.
Mairs & Power Balanced (MAPOX) and Mairs & Power Growth (MPGFX) have made an art of buying high-quality stocks that they can hold for a long time. Manager Bill Frels is set to retire at year-end, but the fund still passes the tests; his comanagers started in 2006, and each has more than $1 million invested.
A drop to a 0.70% expense ratio has nudged this fund onto the list for the first time. Managers Kevin Beatty and Ted Maloney look for a slew of good growth and quality characteristics like strong cash flow, great management, and above-average earnings growth. Beatty is the longer-tenured one, and since his 2004 start date, the fund has beaten the S&P 500 by nearly 100 basis points annualized.
Likewise, Mutual Quest’s falling expenses have elevated it to our list. Unfortunately, the closed Z shares are the only ones to qualify. This fund is run the deep-value Mutual Series-way by the skilled Shawn Tumulty and Keith Luh.
All six Primecap funds make the list. Three are from Vanguard, and the other three are under its Odyssey label. Two of those six remain open to new investors: PRIMECAP Odyssey Growth (POGRX) and PRIMECAP Odyssey Stock (POSKX). Their outstanding analysts and managers simply outresearch the rest of the growth world. I suggest starting your growth search with these two funds and seeing if you can find one to top them.
Yes, despite recent struggles and the departure of Ken Feinberg, this fund is still running more than 100 basis points a year ahead of the S&P 500 under Chris Davis’ watch. We took it down to Bronze when Feinberg left, but we still think Davis’ Buffett-inspired strategy should win in the end.
Manager departures have pared the ranks of T. Rowe Price funds on this list. In addition, T. Rowe has switched to CITs in its 401(k)s, and that has led to lower manager investment levels in mutual funds. However, there are still four excellent funds here, including two that are still open to new investors.
Enjoy yourself. Here are nine cheap, excellent funds that are still open and have whipped their indexes. There are also the aforementioned closed Primecap-run funds.
I made one change in the 48 from the table published in FundInvestor. I discovered that American Funds New Perspective only failed because we don’t have a record of its benchmark going all the way back to 1992 when Gregg Ireland became manager. However, the fund did beat the world-stock indexes in our database that go back that far, so I’ve included it here.