Sell JAOSX and buy SFGIX?

expatsp

I've held JAOSX on and off for about six years and it's been volatile in a predictable enough manner that it's been one of my few market-timing successes (I bought in 2008, sold half in early 2010, bought more at the end of 2011) so I've done pretty well in it despite its poor recent performance.

But though I tend to like funds with high conviction managers (JAOSX has 49.45% of its AUM in its top 10 holdings), a mandate that lets them invest broadly (JAOSX can go anywhere internationally and can even put 20% of assets into U.S. stocks), a good long-term track record, and poor recent results (e.g. Fairholme), I am beginning to lose faith in Brent Lynn and am considering selling it (this is a good year for me to harvest capital gains) and buying SFGIX instead.

It's not an exact fit, since JAOSX can go pretty much anywhere and SFGIX is emerging markets, but in recent years JAOSX is mostly EM anyway.

Aside from the fact that Janus seems a pretty disreputable asset manager these days (though JAOSX's manager has been with the fund since 2001 and has over $1 million invested in it), I have trouble forgiving him taking such a huge stake in Petrobras. I live in Brazil, and Petrobras may be cheap enough to invest in now, but a few years anyone following this country or this company even slightly could see the warning signs.

On the other hand, to walk away from a high-conviction manager with a great long term record after a few bad years seems like the exact way to have subpar returns.

Thoughts?

Old_Skeet

Hello,

I harvest capital gains myself form time-to-time ... and, I think it's a prudent investment stradegy to follow. But, since JAOSX can transverse to global investment universe I think I'd hold on to some of it regardless of what you choose to do with the sale proceeds from the shares you may choose to sell. One of the things that you don't tell us is what percent of your portfolio does JAOSX occupy. If it is eight percent or less ... perhaps I'd do nothing while if it is a large percentage I'd trim it back and re-position some to the capital into some other funds for a more diverisfied thinking and strategies type approach.

Skeeter

expatsp

Hi Skeeter,

Thanks for your thoughts. JAOSX is a little over 4% of my portfolio. So it sounds like you think I should keep it, which is probably the rational thing to do. I just needed some support to hold on to an underperforming fund, when it is so tempting to sell in order to invest in the great funds David keeps profiling on this site.

BobC

There are so many really good international fund managers. This one is not only a dog (100th percentile for last 5 years), but you may recall the fund company itself was caught in the mutual fund scandal (fund managers trading on the side) of a few years ago. There is no reason, in my opinion to hold onto this fund. Thornburg Intl Growth TINGX, Peartree Polaris Foreign QFVOX, Oakmark Intl OAKIX, First Eagle Overseas SGOVX, Wasatch Intl Growth WAIGX, Artisan Intl ARTIX have talented managers with good records.

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scott

I started a small position in the fund about 1.5-2 years or so ago I dumped it recently - it has occasionally had some decent stretches during this period, but overall has done terrible. The fund continues to focus hugely on what have been significant mistakes - Petrobras, Reliance, Nintendo and Li and Fung, among others. I'm surprised the fund doesn't own Microsoft.

AndyJ

Reply to @Maurice: Like you said, I wouldn't dream of selling out of Matthews, but it doesn't have to be either/or. Although I'm not entirely satisfied with SFGIX yet (Andrew F. hasn't proven so far, imho, that he's going to be successful as an ex-Asia investor), I'd been looking for a broad EM fund run like a Matthews fund, and Seafarer is a natural on that score.

expatsp

Thanks for the opinions, guys. I really am in the fence. Doubling down on your bets when they are down is what you are supposed to do if you believe in them. The JAOSX manager certainly has conviction--this truly is active management--along with a terrible 5 year record and an astonishingly good 10 year record. Is it the 5 year record or the 10 year one I should look at?

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expatsp

I've pulled the trigger: I put in an order to Schwab to sell JAOSX and buy SFGIX with the proceeds. I finally just asked myself this: If I had cash to invest and no history in either fund, which would I buy? There was no doubt as to the answer.

mrc70

Reply to @Maurice: I don't have anything against Mathews funds but they are different as you have also acknowledged.

I am a bit concerned about the constant change in mgrs at Mathews.
We have more than a couple of changes at MACSX and MAPIX in the last 5-7 years.

mrc70

Reply to @scott: Done terrible ? What period of performance you are referring to, Scott?

scott

Reply to @mrc70: Sorry wasn't clear. The last few years. I will say again though it's made some considerable mistakes in some of its largest holdings.

Old_Joe

Not sure exactly why, but SFGIX added 1.3% today and MAPIX added 1.86%. WAFMX up only 0.35%, confirming (or at least suggesting) that there is at least some degree of diversification between EM/Asian/Frontier categories.

ducrow

Reply to @expatsp: The Five Year Or Three Year Record Is What I Would Look At.

ducrow

Reply to @expatsp: I Also Purchased Shares Of SFGIX Today. I Was Going To Hold Off Buying, But After Mulling Davids Commentary Over For a Few Days, I Pulled The Trigger Today.

expatsp

Reply to @ducrow: Of course, the day after I sold JAOSX to buy SFGIX, JAOSX had a great day. But obviously one-day performance doesn't mean much after a couple of months. It is impressive how well SFGIX has outperformed its peer group since inception.