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Fund Focus: Yacktman Fund & T. Rowe Price New Horizons Fund
How'd they do that? YAKCX boasts out-sized returns for a low risk fund, if thats what it is. Double digit: 1,3, 5, 10 years. Appears fully invested in stocks now and also to be high turnover judging by Lippers lowest tax efficient score. Not to diminish their record. Just curious. Were they long gold? Long treasuries? Short stocks during 08? Or just damn lucky?
Yacktman is one of the few funds out there that doesn't just sit fully invested and go, "Well, it was a bad year" if the markets go South. The fund can go fairly heavily into cash and did so in 2008. It can not hold anything besides stocks, as far as I know. So, it's really just being defensive when it warrants and being aggressive when it warrants. I'm not interested in a US stock fund, but if I was, Yacktman would be high on the list due to my respect of his skills and his respect for his shareholders.
Re: the Price fund -- the next 6-12 months will be the acid test for Mr. Ellenbogen. Prnhx has shot out the lights since the bust, but the P/E's in the stratosphere and there's really no place to run for an $8 billion small cap fund when the next downdraft gets rolling.
I bought Yacktman early in 09 because I was and still am looking for funds with a preservation strategy. Its a favorite of mine. Moving to cash is obviously a good way to go in tough times based on the performance of YACKX.
Yacktman is going to provide high quality dividend paying stocks in the current climate. It is a true value fund, (Don yacktman, the manager almost got ousted during the 99-01 tech bubble because he refused to invest in the .coms) and will hoard cash when there aren't investment options. Their performance numbers are more a result of their downside protection in '08 than their performance thereafter. They can hold debt, but typically don't. As for why it is tax inefficient, i am not sure. What i can say is turnover is generally low as Yacktman is very patient with their selections. Also of note, the Yacktman Focus fund is pretty much the same fund with a little more flexibility (can use options strategically, also can buy more debt but usually not), and was recommended to me by Vince Sellachia, co-manager on the funds. Truley a great long term fund to hold.
Did you notice that Yacktman was doing VERY poorly for the first five years since opening the fund in 1997? Do you think that they simply learned the lesson, or a similar period of significant underperformance is possible in the future?
There's always the possibility of a period of underperformance, but there's performance vs. expectations as another factor. Additionally, every manager will underperform at one time or another - you see it on this board with "hot funds" and then the fund underperforms and no one talks about it again for a while. The manager didn't take stupid pills, underperformance at times simply happens.
I'm not sure what underperformance you're talking about (+30.4% '95, +26.02 '96, +18.28% '97) after that, the underperformance is from not investing in tech during the bubble which paid off in the 00-01 bear market (up 13.46 and 19% respectively). As i said before, not a fund that is going to follow in a straight up market, but shines during broad market sell offs.
What I have in mind is a certain period, from 1997 to 2000, when the fund had fallen by about 25% whereas S&P500 has grown about 70%. $10.000 invested in S&P500 during this time would give you about $17.000, whereas the same money invested in YACKX would become $7.500. Would you stay in this fund or run somewhere else?
I am considering investing in this fund now, but I am afraid that once it starts underperforming again (and it certainly will, at some point), I may not necessarily trust the manager and run.
Andrei, if you can't trust a manager with a 20 year track record like Don Yacktman's, im not sure any value fund is going to be right for you. And yes, but if you held those funds through 2002, you lost nearly 45% of that 17k, where as Yacktman provided up years of 10+% each year. Any good value manager will tell you that underperformance in straight up markets is to be expected, its is in down markets that value managers shine.
And scott no tech, None in the 99-01 period . . . .almost got ousted by his own board at the time.
Yacktman shareholders revolted in 1999/2000 and he almost lost control of the fund. I think he was himself heavily invested in the fund so he managed to stick around as manager. I remember the episode very well.
I would have some concern from their actual long term record. they had a great 2001-2002 and then when the market came apart in 2003 they were in 50 percentile, in 2004- 80%, 2005-98%, 2006- 77%, 2007-35% 2008-2%, 2009-1%, 2010- 61%, YTD-55%. To me they are either hot or cold. Morningstar has them as above average risk. At 3 yr and longer Morningstar shows * Annualized returns. A year like 2009 makes other years look better. Just my opinion.
As I said earlier, I myself consider investing with YACKX, I am just playing a role of devil's advocate. For example, if I would look at YACKX record for the first 10 years, from 1992 to 2002, then the graph in M* shows that its performance from 1992 to 2002 was solidly below the graph of S&P500. You will also see that Yacktman's "proven record" for the last 20 years is mostly due to the last 3 years. This gives me a pause, but I may be totally wrong here. And yes, I am heavily invested in several value funds, mostly from Oakmark, which also had some hiccups, but nevertheless performed brilliantly as a group.
As many people do in this board, hold a couple of top performing funds in each category so you if one of the managers lose their mojo, you are not affected too much. You can even play to the monentum of these managers shifting monies from the one that is lagging to one that has positive momentum.
If you do not want manager risk or cannot trust a manager you are probably better off with index funds. Past returns are not a guarantee for the future and funds that have done well in the past may or may not continue to deliver in the future. Investing in active funds is act of faith in the manager. You cannot do an intellectual analysis and be 100% sure in the end.
Agree about having faith in a guy like that. We have an awful lot of money (for me) with him and his boy.
Don't know where andrei concludes the record is mostly due the last 3y. Nonsense, and easy to check. For example, chart it from 02 on, or 07 on, or whatever. Note 08-09 performance relatively. Etc. In fact the last 3y is quite fine but not more than that.
Comments
Or just damn lucky?
I am considering investing in this fund now, but I am afraid that once it starts underperforming again (and it certainly will, at some point), I may not necessarily trust the manager and run.
And scott no tech, None in the 99-01 period . . . .almost got ousted by his own board at the time.
I would have some concern from their actual long term record. they had a great 2001-2002 and then when the market came apart in 2003 they were in 50 percentile, in 2004- 80%, 2005-98%, 2006- 77%, 2007-35% 2008-2%, 2009-1%, 2010- 61%, YTD-55%. To me they are either hot or cold. Morningstar has them as above average risk. At 3 yr and longer Morningstar shows * Annualized returns. A year like 2009 makes other years look better. Just my opinion.
If you do not want manager risk or cannot trust a manager you are probably better off with index funds. Past returns are not a guarantee for the future and funds that have done well in the past may or may not continue to deliver in the future. Investing in active funds is act of faith in the manager. You cannot do an intellectual analysis and be 100% sure in the end.
http://findarticles.com/p/articles/mi_m1318/is_2_55/ai_69664642/?tag=content;col1
Agree about having faith in a guy like that. We have an awful lot of money (for me) with him and his boy.
Don't know where andrei concludes the record is mostly due the last 3y. Nonsense, and easy to check. For example, chart it from 02 on, or 07 on, or whatever. Note 08-09 performance relatively. Etc. In fact the last 3y is quite fine but not more than that.