My Y2K fund picks
Now that the Dow Jones Industrial Average is back above the 11,000 level, US stocks may appear significantly overpriced to most investors, particularly those with a Benjamin Graham value bias. The S & P 500 market benchmark, for example, is trading at thirty-one times earnings (its average price earnings ratio). These excessive valuations notwithstanding, there are still some mutual funds that, from a long term perspective, look attractive to me.
If I were to assemble a mutual fund portfolio this coming January, I would be sure to purchase a broad array of fund assets, from large company value funds to small company growth funds.
On the large capitalization value front, I like Selected American Shares, Excelsior Value and Restructuring, and the Torray fund. Each fund has an excellent long term performance record and a low annual expense ratio. All, of course, are no-load funds.
Although large company value funds have been out of favor in recent years, these funds have still managed to produce respectable returns while still staying true to its value investment style
On the large capitalization growth side, I like the Alleghany Chicago Trust Growth and Income Fund, which, while not spectacular, is still one of the best performing funds of its kind over a five-year period: roughly 26 percent a year, on average.
Large company growth funds have, of course, been the darlings of Wall Street in recent years; and because of this tremendous rise, they may soon correct or fall out of favor. The Alleghany Chicago Trust fund, however, appears to pay some attention to valuations.
I also like it because, even though Morningstar rates it with five stars, it is still not generally very well known and hence has a relatively small asset base ($500 million).
On the mid-cap (medium sized company) value front, I like Oakmark Select, Weitz Value, Weitz Partners Value, and the now closed Longleaf Partners Value Fund. I believe these are the best mid-cap value funds in the market today.
For the mid-sized growth side, I like the Vanguard Capital Opportunity Fund most of all. It is up more than 70 percent so far this year. The stock valuations are not so outlandish. The fund’s management team is the same one that manages Vanguard Primecap–a superior long term-holding (now closed to new investors). The only problem with this fund is its hefty $25,000 minimum initial investment.
Finally, on the small cap growth front, I like the Alleghany Aggressive Growth Fund — a new offering, up more than 80 percent year-to-date.
