Although the market has been exceptionally volatile, some mutual funds have been able to handle the risk and deliver strong returns for investors, Dow Jones reports.
The managers of the mid-cap core Fairholme Fund, for instance, look for bargains and only invest in companies run by talented management teams. The managers say that taking such a careful look at companies has given them an education in various industries.
Apparently it works. In the past five years, the fund has returned an average of 17% a year.
And currently, rather than view the market’s volatility as a glass half empty, the managers are looking at it as an opportunity to buy stocks are value prices.
Likewise, the Third Avenue Value Fund seeks out bargains, but portfolio manager Marty Whitman looks for safe stocks and expands his sights overseas.
Although the Jensen Fund’s focus on large-cap growth stocks have hampered it in recent years, these are poised for a comeback. In the late 1990s, the fund delivered returns in the top 1% and 2% of large-cap growth and even weathered the market correction during the tech wreck.
One of the main reasons for the fund’s steady returns is that its managers only invest in stocks that have produced at least 10 straight years of 15% or better returns on equity. A second is that they look for stocks trading at 30% or greater discount to current market valuations.
“When a company reaches that mark, we found that they tend to have sustainable competitive advantages in their industries,” said Robert Millen, co-manager of the Jensen Fund.