Steve Goldberg is an investment adviser in the Washington, D.C., area.Investment Newsletter - Financial Newsletters - Stock Newsletter Home Business Tech Markets Entrepreneurs Leadership Personal Finance ForbesLife Lists Opinions Video Blogs E-mail Newsletters People Tracker Portfolio Tracker Special Reports Commerce Energy Health Care Logistics Manufacturing Media Services Technology Wall Street Washington CIO Network Enterprise Tech Infoimaging Digital Infrastructure Internet Personal Tech Sciences Security Wireless Bonds Commodities Currencies Economy Emerging Markets Equities Options Finance Human Resources Law & Taxation Sales & Marketing Management Technology Careers Compensation Corporate Citizenship Corporate Governance Managing Innovation CEO Network Reference ETFs Guru Insights Investing Ideas Investor Education Mutual Funds Philanthropy Retirement & College Taxes & Estates Collecting Health Real Estate Sports Style Travel Vehicles Wine & Food 100 Top Celebrities 400 Richest Americans Largest Private Cos World's Richest People All Forbes Lists Business Opinions Investing Technology Opinions Washington & The World Companies People Reference Technology Companies Events People Reference Companies People Companies Events People Reference Companies Events People ReferenceĬheney Seeks Permanent Tax Cut 1:37 AM EST From Odyssey Stock’s inception in late 2004, the fund returned an annualized 9.8%-an average of 1.7 percentage points per year more than the S&P. Returns often diverge sharply from the S&P 500, depending upon the direction of the health and tech sectors. But, unlike its friskier siblings, this fund has almost all of its assets in large, well-established companies. Like the other Primecap funds, Odyssey Stock has more than half of its assets in two sectors: technology and health care. The fund is a near-clone of the storied Vanguard Primecap ( VPMCX), which has produced solid returns since its 1984 launch but is closed to new investors. Primecap Odyssey Stock ( POSKX) is the tamest of the three funds run by Primecap Management under the Los Angeles firm’s own name. Over the past 10 years, LKCM gained an annualized 9.0%, an average of 0.8 percentage-point per year better than the S&P. He and his colleagues focus on large companies, looking for those that have strong cash flow and high returns on equity (a measure of profitability) and that sell at bargain prices. But today he has three co-managers and a large analyst team. Lead manager Luther King has been using much the same methods to pick stocks since 1979. LKCM Equity ( LKEQX), based in Fort Worth, has been putting up solid returns since 1995. Aggregate Bond index (all fund returns are through July 18). Over the past five years through July 18, the fund returned an annualized 6.4%, compared with 4.8% annualized for Barclay’s U.S. If rates were to rise one percentage point, the fund’s price would fall about 4.5%. But the fund is moderately susceptible to rising interest rates (bond prices and rates generally move in opposite directions). So it’s no surprise that the average credit quality of Income’s holdings is relatively high, at single A. Most of the fund is invested in investment-grade corporate bonds and government-backed mortgage securities. The managers of Dodge & Cox Income ( DODIX) apply the same kind of careful company research to investing in bonds that they do at their firm’s better-known stock funds. So I asked Kinnel for a short list of slightly lesser-known gold-rated funds. Most Morningstar fund picks won’t surprise any Kiplinger readers-or, for that matter, readers of my column. Morningstar research has shown that all of these factors are good predictors of future success. But Morningstar also favors funds with low expense ratios, that are run by managers who invest a healthy chunk of their own money in their funds and that come from firms with a sound corporate culture. How does Morningstar pick standout funds? Good returns are important, of course, particularly risk-adjusted returns.
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