It isn't very often that I find myself agreeing with the popular press.
Surprise! Fortune magazine recently came out (October 1993) with its 1994 Investor's Guide, a listing of recommended funds that I happen to substantially agree with.TEN FUNDS THAT CAN SHINE IN 1994. Fortune, instead of relying on its in-house research staff, sought out the opinions of real mutual fund experts - those who actually invest money in mutual funds for a living. What Fortune came up with is a list of excellent funds, many of which have been members of my Mutual Fund Superstars conference faculty. What do you know? Me and the popular press agreeing. What will happen next?
Fortune asked a panel of leading money managers and investment advisers to pick the funds with "the best shot of rocketing to the top of the lists in 1994." Although I wasn't a participant in the panel, they must have talked to some pretty smart people.
A caveat. Two of the funds in this list (SoGen International and New York Venture) are load funds and you know how I feel about load funds. SoGen International is also considering closing soon.
PREVIOUS SUPERSTARS FACULTY. Five of the 10 fund managers recommended in the Fortune piece have been speakers at my Mutual Fund Superstars conferences in 1993. (For a list of future conference dates and sites, call 800-982-2455.) Throw out the two load funds and that means that five of the eight Fortune picks are in line with my definition of a great fund.
Who are these eight great funds? Read on.
I know, you want to know which of the above funds are members of my Superstars faculty. I'm pleased to say that Robert Cohen (Cohen & Steers), Donald Yacktman (Yacktman Fund), Tom Ebright (Royce Premier), David Herro (Oakmark International), and Richard Aster (Meridian Fund) have all spoken at my conferences and are elite members of my invitation-only Superstars faculty. These guys know how to manage money. How do they do it?
OAKMARK INTERNATIONAL, my favorite international stock fund, managed by David Herro, follows a strict "value" approach to finding stocks. Herro first finds companies selling at less than their underlying private market value, regardless of the country.
This frugal strategy has kept Oakmark completely out of Japan and into Europe, Latin American and some emerging markets in the Pacific Basin. Uniquely and superbly managed.
ROYCE PREMIER, managed by the trio of Chuck Royce, Tom Ebright and Jack Fockler, Rocye Premier is a concentrated clone of the closed-Pennsylvania Mutual. Another "value" fund, Royce Premier selects companies which have a very high return on assets, low P/E and price/book ratios.
Other Royce funds are very diversified, often with over 150 companies, but Royce Premier contains "our 50 best stocks ideas," says Fockler.
THE YACKTMAN FUND, managed by Donald Yacktman, may seem like an odd choice given his poor 1993 performance. As described by Fortune, Yacktman's holdings "read like Wall Street's Least Wanted - you can't find more hated stocks."
Yacktman invests in what he calls "beach balls being held under the water" which means that he is buying high quality growth companies that are selling at steep discounts to their intrinsic value because they are misunderstood or suffering from temporary setbacks. Companies like Phillip Morris, Gerber, Merck, Sallie Mae are big holdings in the Yacktman Fund.
THE MERIDIAN FUND, managed by Rick Aster, is different than the above three funds in that he is a tried and true growth stock picker. Aster prefers small cap (under $750 million) stocks that are experiencing rapid top-line (sales and revenues) growth and accelerating bottom-line (earnings) growth of at least 15 percent a year.
The smallest fund mentioned, the Meridian Fund, is one of the undiscovered gems with assets under $50 million.
COHEN & STEERS REALTY SHARES is a sector fund that is one of the best ways to participate in the hot real estate market. If you agree that real estate prices are at or near rock-bottom, then a real estate fund like Cohen & Steers is an excellent way to play this industry.
Grabbing out-of-favor properties at bargain-basement prices with dividends in the four to seven percent range, this fund is an attractive alternative for income investors dissatisfied with low CD and T-bill rates.
*****
(Chart)
Fortune 10 funds for 1994
Fund Name 800Number Type Load
Cohen & Steers Realty Shares 437-9912 Real Estate No
Fidelity Stock Selector 544-8888 Value No
Meridian 446-6662 Small Cap No
Montgomery Global Com 428-1871 Intl Sector No
Mutual Beacon 553-3014 Value No
New York Venture 279-0279 Value Yes
Oakmark International 476-9625 Intl. No
SoGen International 334-2143 Global Yes
Royce Premier 221-4268 Small Cap No
Yacktman 525-8258 Large Cap No