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7 managers you can trust through thick and thin
Trust is hard to come by today. But after sifting through notes on hundreds of interviews with mutual fund managers, Ive identified an elite group of professionals you can rely on.
By Harry Domash
I doubt if Jonathan Clements spends much time thinking about me. But I think about him all the time. Clements covered personal finance and investing for The Wall Street Journal, back when I wrote a column for The New York Times. I still read his Getting Going column where he advises readers to be cautious and invest in a balanced portfolio of stocks and bonds through index funds.
Thats what I used to tell readers of the Times, too. When I started writing an online column in 1997, I wanted to call it The Fuddy-Duddy Investor, which I thought summed up my approach. Once installed on the Web, though, I moved far away from home base with only Clements and his column to remind me of the old days. Im not sorry that I evolved into a more eclectic investor, but reading Clements always reminds me that theres value in the tried and true.
And thats what prompted me to come up with a list of mutual fund managers I know and love. Well . . . know and like, but people Id trust through the thick and thin of the markets. Im not claiming that these are the seven best managers in the world. They are the people I think of when I think about good managers, those who havent been afraid to be contrarians, to go out on a limb and stick with what they believe.
Back in my fuddy-duddy days, I was a value investor, and so I was most impressed with the investing crowd gathered around Henry Emerson and his quaint and quirky newsletter, "Outstanding Investor Digest." OID, which is published erratically and costs somewhere around $500 a year, has achieved cult status among top value managers. Indeed, when I contacted OID subscribers for a feature story on the publication several years ago, it was like talking to the value manager hall of fame. The only value manager who didnt call me back immediately was Warren Buffett. Marty Whitman of Third Avenue Value (TAVFX) said it gives him cachet to be part of the OID crowd, which includes Buffett, his partner, Charlie Munger and their pal, Bill Ruane, co-manager of the legendary Sequoia Fund (SEQUX), which invests nearly a third of its assets in Buffetts Berkshire Hathaway (BRK.A). Sequoia, which has been closed for 20 years, is the fund that comes closest to the Buffett style.
7 stars to trust
Some of my favorite managers come from the OID subscriber group.
1. Christopher Browne, managing director of Tweedy Browne, the firm that served as broker to the legendary value investor Benjamin Graham, author of the 1934 classic, "Security Analysis." Tweedy Browne is where Warren Buffett hung out when he was young and poor. I like Browne partly for this pedigree, because hes part of this rarefied group of serious value investors (as he calls it), and because being part of the group means loyalty to a strict value methodology for investing.
In fact, the OID managers say that OID is the only publication where they find ideas about stocks to buy because the investors who are interviewed in it share a similar approach. My favorite international fund is Brownes Tweedy Browne Global Value (TBGVX).
2. Mason Hawkins, co-manager of Longleaf Partners (LLPFX) claims that he was one of the first subscribers to OID and that its virtually the only publication where he finds stock ideas. Ive interviewed Hawkins a number of times, and I like the rigorous screening process he uses for the stocks he considers, those he buys and those he sells. Ive interviewed hundreds of fund managers, and Hawkins is one who stands out as principled and committed. I also like the fact that employees invest most -- or all -- their money in the funds.
3. Jim Gipson, co-manager of Clipper Fund (CFIMX) is another value man Ive talked to over the years who has never changed his story. Some investors consider Clipper a close proxy to the Sequoia Fund, or at least as close as you can get. Don Phillips, managing director of Morningstar and a man who knows his mutual funds, has dollar-cost-averaged into Clipper ever since I met him in the mid-1980s.
4. Bruce and Ernest Monrad. Not all my favorites are part of the OID inner circle. But many of them are value men, like Bruce Monrad and his father, Ernest, who co-manage Northeast Investors Trust (NTHEX), the best junk bond fund on the market. The fund opened in 1950 and Ernest started managing it in 1960, joined by Bruce in 1993. The Monrads impress me with their knowledge of the market and their willingness to shoulder risk and to know when to go out on a limb. Junk bonds are not my investment of choice. But if I were looking for such a fund, this one would be it.
5. John Gunn, leader of the management team at Dodge & Cox Stock fund (DODGX), which I came across when I researched the first mutual fund book I wrote back in 1987. The first time I interviewed Gunn, I was writing an article on mutual funds managed by teams. Gunn struck me as a well-educated gentleman with a great sense of humor who didnt feel the need to boast about his investments. At the time, conventional wisdom in the fund business was that team management was grey and unimaginative. Gunn took me through the hurdles a stock had to cross to get into the portfolio and talked about how long the team held their stocks once theyd bought them. This is the kind of fund to hold as a portfolio core. When the markets are as crazy as theyve been over the past two years, I always trust that Gunn has a better handle on them than I do (which I admit is not saying much.)
6. Ed Owens of Vanguard Health Care (VGHCX) is one of my favorite managers, even though I cant say Ive spent much time on the phone with him. I like health care, and I like Owens conservative approach. I bought this fund for myself and for my kids college portfolios, and its one of the few funds that hasnt disappointed me over time. The only negative is that Vanguard has raised the minimum initial investment to $25,000.
7. Jim Oelschlager of Oak Associates is still on my list, too. One thing I learned in the 90s is that an all-value portfolio is not the way to go. But growth scared me because I couldnt figure out what most of these guys were doing with their money. That wasnt the case with Oelschlager. He bought stock in three concentrated areas of the market -- tech, financials and health care. Concentration takes guts, and I liked that. I also liked his low turnover and commitment to the stocks he bought. Managers who trade a lot seem to be experimenting. I like a manager with a plan.
Oelshlagers White Oak Growth fund (WOGSX) is not on many peoples A-list right now. The fund has taken a terrible hit along with other tech funds and along with the entire market. But I still feel confident in Oelschlagers judgment. I dont think hell panic when his investing style is down, just as Hawkins and Gipson and Gunn and Buffett didn't panic when the value style was out of favor.
Hundreds of interviews
Why do I bring up this group of managers now? Many investors feel theres no one to trust in the stock market anymore, that everyone is on the take.
When I went back and looked through the hundreds of portfolio manager interviews Ive done over the years, I saw how many of those hundreds of managers were a flash in the pan, a gimmick or a one-trick pony. As investors, we want to try to find out how to get behind that and identify those people who do what they say and say what they do. We cant give up on investing. So weve got to keep trying to figure it out. That argues for finding some managers you can stick with.
At the time of publication, Mary Rowland owned Longleaf Partners, White Oak Growth, Vanguard Health Care, Dodge & Cox Stock.
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