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M* A Short List Of Funds That Invest With Conviction
On LEXCX: expenses are about 0.51%. Turnover is 0%. The portfolio was set in 1935 and hasn't changed since then except to account for corporate events such as mergers, acquisitions and spin-offs. When there are inflows, the fund (it doesn't even have a manager) buys an equal number of shares of every holding; when there are outflows, it sells an equal number of each.
If my folks had been able to chuck $100 at the fund on the day I was born, it would be worth $34,000 today. An investment in the average LCV fund would have grown to $25,000.
I would add IWIRX to the mix. 30 holdings, 14% turnover, a very small asset base for a large blend fund and a great record. Maybe even better, M* doesn't cover it!
So now I'm wondering if any of the board's participants, or their parents, own LEXCX.
Edited to add: Just for giggles I charted an investment in FCNTX on the day Will Danoff became the funds manager (09/17/1990) vs. LEXCX. They are different funds but just indulge me here. One of my first IRA investments was in the Contrafund on, or around the time Mr. Danoff took control. I knew precious little about investing or mutual funds other than the diversity aspect. I was intrigued by the 'contra' part and figured what the hell. If only I could have funded is with $10K as M* charts depict other than whatever piddling minimum amount I began with at that time.
I charted an investment in FCNTX on the day Will Danoff became the funds manager (09/17/1990) vs. LEXCX.
I wanted to indulged your chart a bit further. 1990 was about the time when I first invested in Vanguard Healthcare, VGHCX. Here are LEXCX, FCNTX, and VGHCX over the last 25 years:. All three seem to have great market cycle performance (30ish years).
Just wondering why anyone would buy LEXCX. With only 21 positions that never change it seems like you could create this fund on your own without incurring the expense ratio and you have more control over any tax consequences of redemptions. I guess if they buy and sell an equal number of shares rather than an equal percentage of each position you might find it more costly to maintain the allocations but because it's a passive portfolio you could also simply assume there are no inflows or outflows and you'd probably end up close.
Just wondering why anyone would buy LEXCX. With only 21 positions that never change it seems like you could create this fund on your own without incurring the expense ratio and you have more control over any tax consequences of redemptions. I guess if they buy and sell an equal number of shares rather than an equal percentage of each position you might find it more costly to maintain the allocations but because it's a passive portfolio you could also simply assume there are no inflows or outflows and you'd probably end up close.
I've often thought this would be a good way to start as well as end a stock portfolio.
As one ages and distributes their IRAs there is greater likelihood of having a taxable investment account. Owning stock in a taxable account has many advantages over mutual funds. Harvesting tax losses, as you mentioned, is one. Another has to do with estate planning. Passing stocks on to beneficiaries provides the recipient with an additional tax savings. A stock's cost basis resets for the beneficiary at the date of death. Inheriting those same stocks by holding them in LEXCX (or any other fund for that matter) would incur capital appreciation costs (taxes) to your beneficiary. Strange, but true.
@Bee - Wow! Always ahead of the curve you are. Back then it seemed like investments were all about Tech and not so much Health Care. Good move.
I'm still catching up in that regard with the bulk of my assets in Energy related issues who's dividends I use these days to fund Health themes (HQL), REIT's (OHI) or specific companies (GILD).
@LLJB - I wonder, and wondered that about similar type investments for a long, long time. In my case it was specifically centered on 1) energy MLP's e.g. any number of CEF's like KYN and so on and 2) dividend-related funds e.g. SCHD, VIG, HDV etc.. For many I believe it might have to do with the fear of owning an individual stock position(s) vs. the mutual fund construct and possibly having the $$$ to construct such a portfolio. It's a little simpler these days using sites such as Folioinvesting (https://www.folioinvesting.com/folioinvesting/home/?gclid=CMzpkYGTv8UCFRABaQodwBUAMA) where you can build a portfolio pretty cheaply over time but I can still see where it might appear daunting to many. This is not an endorsement for the site as I don't personally use it but I have considered it often and still may go that route to fund my grandchildren's savings accounts.
I made the leap from funds to equities largely because the yields from the funds or CEF's were often less than half of what I could get from owning the companies outright. Granted I stick with primarily blue-chips but then so do the other guys.
I wonder, and wondered that about similar type investments for a long, long time. In my case it was specifically centered on 1) energy MLP's
Thanks Mark, but again, I first learned about HC spending time at FundAlarm (MFO's inspiration). Learning continues. Thanks for your contributions.
I have read that MLPs receive special tax treatment that is passed onto the individual owner. This benefit is lost when held in a mutual fund. If this is true then one more reason to own MLP companies outside of an etf or mutual fund. K-1 reporting is the downside in a taxable account. @Scott has talked about K-1 reporting in the past.
Bee yes, it's true what you say about the tax treatment. As for the k-1's, TurboTax handles them easily, automatically in many cases, so I have no issues there although others might. I confess to also holding most of my MLP positions in a Roth IRA account where the k-1's are largely a non issue. UBTI over $1K could make them become an issue some day but as of today I've never seen a positive UBTI figure for any of my holdings much less a total approaching $1K.
K1s are USUALLY fine and usually no problem with turbotax. There are, however, instances where they are not. See the KMP buyout situation which created a lot of frustration.
I'll also give you another delightful example: Energy Transfer Equity (ETE), which has stakes in a number of different partnerships. So you have to do a K-1 for each of the underlying holdings. That's a fun one (not.) ETE has done really well (on Goldman conviction buy list, $86 tgt), I like management a great deal. If it hadn't been doing as well as it has, I'd consider giving it the boot because that K-1 situation is just nuts.
Other than that, K-1s are never fun to deal with but they're okay. Personally, I own a number of partnerships but I recommend keeping to what you believe are absolute "must haves" - that's going to vary from person-to-person, but my view is really just only focus on your very best ideas in terms of PTP (publicly traded partnerships.) Don't speculate/trade MLPs because you'll end up with a K1 even if you hold it for less than a day.
Ultimately, I've looked for some alternatives instead of going any further into oil partnerships. Inter-Pipeline (IPPLF), which used to be a Canadian partnership, is one example. That's a very interesting company with some overseas exposure and a monthly dividend. Enbridge Income Fund (EBGUF.PK) is not something I own, but that's another example.
Also, in a related note: apparently Blackstone (BX)'s spin-off later this year will not be a partnership.
I also have a LOT in health care and while I've considered a few possible additions, I'm probably done with adding to that.
The other things that I have a lot of are the commodities exchanges and credit card co/financial technology.
Okay, so why suddenly I see JOHCM funds being mentioned all over the place? I never heard about them before, and I mean even on the boards and now suddenly they are being mentioned all the time. Any (good) reputation to know about?
I only came across JOHCM because Robert Cresci joined the firm to run International Small Cap (previously ran at Harding Loevner with a great track record). JOHCM is a firm that has a solid track record of lifting out teams from previous firms. I'm thinking about taking a look at the EM Opportunities strategy... PMs James Syme and Paul Wimborne ran the same strategy at Baring. The EM SMID could be interesting as well. I'm going to wait and see with that one, though.
I found the ad they're running in Ted's link more interesting than the article itself. Imagine all these people wandering about staring at M* on their wrists all day long. Too funny! --- Morningstar Is Now Available on Apple Watch
Staying on top of the markets is easier than ever: Market movements at a glance Real-time index performance The pulse of the investing world Watch the markets with Morningstar."
Comments
This one has been around the block:
LEXCX - 21 holdings and (edit: 0% turnover...thank you DS)
This is fairly new:
JOHIX - 31 holdings and 60% turnover
Additional Article on the topic:
the-risks-and-rewards-of-concentrated-funds
Regards,
Ted
If my folks had been able to chuck $100 at the fund on the day I was born, it would be worth $34,000 today. An investment in the average LCV fund would have grown to $25,000.
David
Edited to add: Just for giggles I charted an investment in FCNTX on the day Will Danoff became the funds manager (09/17/1990) vs. LEXCX. They are different funds but just indulge me here. One of my first IRA investments was in the Contrafund on, or around the time Mr. Danoff took control. I knew precious little about investing or mutual funds other than the diversity aspect. I was intrigued by the 'contra' part and figured what the hell. If only I could have funded is with $10K as M* charts depict other than whatever piddling minimum amount I began with at that time.
As one ages and distributes their IRAs there is greater likelihood of having a taxable investment account. Owning stock in a taxable account has many advantages over mutual funds. Harvesting tax losses, as you mentioned, is one. Another has to do with estate planning. Passing stocks on to beneficiaries provides the recipient with an additional tax savings. A stock's cost basis resets for the beneficiary at the date of death. Inheriting those same stocks by holding them in LEXCX (or any other fund for that matter) would incur capital appreciation costs (taxes) to your beneficiary. Strange, but true.
I'm still catching up in that regard with the bulk of my assets in Energy related issues who's dividends I use these days to fund Health themes (HQL), REIT's (OHI) or specific companies (GILD).
@LLJB - I wonder, and wondered that about similar type investments for a long, long time. In my case it was specifically centered on 1) energy MLP's e.g. any number of CEF's like KYN and so on and 2) dividend-related funds e.g. SCHD, VIG, HDV etc.. For many I believe it might have to do with the fear of owning an individual stock position(s) vs. the mutual fund construct and possibly having the $$$ to construct such a portfolio. It's a little simpler these days using sites such as Folioinvesting (https://www.folioinvesting.com/folioinvesting/home/?gclid=CMzpkYGTv8UCFRABaQodwBUAMA) where you can build a portfolio pretty cheaply over time but I can still see where it might appear daunting to many. This is not an endorsement for the site as I don't personally use it but I have considered it often and still may go that route to fund my grandchildren's savings accounts.
I made the leap from funds to equities largely because the yields from the funds or CEF's were often less than half of what I could get from owning the companies outright. Granted I stick with primarily blue-chips but then so do the other guys.
I have read that MLPs receive special tax treatment that is passed onto the individual owner. This benefit is lost when held in a mutual fund. If this is true then one more reason to own MLP companies outside of an etf or mutual fund. K-1 reporting is the downside in a taxable account. @Scott has talked about K-1 reporting in the past.
I'll also give you another delightful example: Energy Transfer Equity (ETE), which has stakes in a number of different partnerships. So you have to do a K-1 for each of the underlying holdings. That's a fun one (not.) ETE has done really well (on Goldman conviction buy list, $86 tgt), I like management a great deal. If it hadn't been doing as well as it has, I'd consider giving it the boot because that K-1 situation is just nuts.
Other than that, K-1s are never fun to deal with but they're okay. Personally, I own a number of partnerships but I recommend keeping to what you believe are absolute "must haves" - that's going to vary from person-to-person, but my view is really just only focus on your very best ideas in terms of PTP (publicly traded partnerships.) Don't speculate/trade MLPs because you'll end up with a K1 even if you hold it for less than a day.
Ultimately, I've looked for some alternatives instead of going any further into oil partnerships. Inter-Pipeline (IPPLF), which used to be a Canadian partnership, is one example. That's a very interesting company with some overseas exposure and a monthly dividend. Enbridge Income Fund (EBGUF.PK) is not something I own, but that's another example.
Also, in a related note: apparently Blackstone (BX)'s spin-off later this year will not be a partnership.
I also have a LOT in health care and while I've considered a few possible additions, I'm probably done with adding to that.
The other things that I have a lot of are the commodities exchanges and credit card co/financial technology.
I will put this company on watch to research
---
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Staying on top of the markets is easier than ever:
Market movements at a glance
Real-time index performance
The pulse of the investing world
Watch the markets with Morningstar."