by Alyssa Oursler | August 6, 2012 9:25 am
In contrast to the long-term investment nature of mutual funds, managers tend to come and go fairly quickly. The average tenure? Only around four or five years.
So, having a money manager that sticks around awhile can have its advantages. A tenured top gun tends to have more experience — and thus has survived more twists and turns of the economic roller coaster, as opposed to getting past just a couple hills before pounding his chest for coming out ahead.
Of course, you also don’t want to put your chips behind a mutual fund manager that enjoyed his heyday decades ago and still hangs his hat on that. If you’re not doing anything for me lately, you’re not doing anything at all.
With that in mind, we’re taking a look at three mutual fund managers who have hit a sweet middle ground. Not only have they been in the saddle for quite some time, but they’ve also been able to outperform the market for the past few years:
The longest-tenured manager on this list can be found running the Fidelity Contrafund (MUTF:FCNTX). William Danoff is his name, and he has had a pretty successful run since taking the reins in 1990.
Danoff graduated from Harvard in the early 80s and got his MBA at UPenn’s Wharton School. He joined Fidelity in 1986 and took over the Contrafund after four years as a securities analyst and portfolio manager at the company.
The three most recent managers before Danoff only ran the fund for between one and three years. When Danoff stepped in, though, the now-45-year-old fund saw some stability in leadership once again. And this leader hasn’t been slacking.
Since 2009, FCNTX has seen returns of almost 17%, edging out the S&P 500 (16%) and also beating the large-growth benchmark (15%). In the past year, the fund again beat the market by almost 1 percentage point, while it blew away the benchmark by more than 5. For the past 10 years, Contrafund’s returns were the best out of the nation’s 10 largest mutual funds — and it had less volatility than all but one of those funds.
Contrafund’s investments are spread across a wide range of industries, as can be seen in holdings like Wells Fargo (NYSE:WFC), Walt Disney (NYSE:DIS), McDonald’s (NYSE:MCD) and Dollar Tree (NASDAQ:DLTR).
The focus, no matter the sector, is on fast-growing, strong companies — companies Danoff picks after meeting with executives and doing extensive research. That extensive research and market-beating performance comes at a decent 0.88% expense ratio.
Next up is Donald Yacktman, who runs his namesake Yacktman Services Fund (MUTF:YACKX). Twenty years ago, Yacktman — who earned his MBA from Harvard — founded the Yacktman Asset Team. With that, the Yacktman Services Fund was born, and he has been running it ever since. (Although family member Stephen Yacktman also was pulled on board to help a decade later.)
The year before he founded his firm, Yacktman was named Portfolio Manager of The Year by Morningstar. And after creating his own firm and fund, he has been just as successful — despite a rough spell of subpar performance during which he was almost ousted from the top spot.
I bet investors are glad he stuck around now: YACKX has outperformed the market since the financial crisis, with a three-year return over 18% — 2 percentage points better than the S&P 500, and much better for the large-blend benchmark. In the past year, the story is much the same — Yacktman’s mutual fund sneaked ahead of the market and blew away other large blends.
The fund has a relatively concentrated portfolio, with a good chunk of its holdings in consumer stocks like Coca-Cola (NYSE:KO), PepsiCo (NYSE:PEP) and Procter & Gamble (NYSE:PG). Yacktman tends to go for high-quality picks that boast consistent earnings and cash flow — a slow and steady investment approach that lends itself to large-cap companies.
YACKX is slightly cheaper than Contrafund, with an expense ratio of 0.8%.
The T. Rowe Price Blue Chip Growth Fund (MUTF:TRBCX) is another fund with solid performance under long-standing leadership. Its manager is Larry Puglia, who joined T. Rowe Price (NASDAQ:TROW) in 1990, then three years later took the wheel at this fund just as it was started. His tenure at TRBCX is fast approaching the 20-year mark.
I can’t imagine a scenario where Puglia won’t make it to two decades, considering his track record. Look at any of the fund’s returns since the end of last quarter (one-year, three-year, five-year, 10-year, since inception), and they all beat both the S&P 500 and the Lipper average for large-cap growth funds — a pretty good history.
In the past year, for example, TRBCX boasts a 7% return that dwarfs the large-cap Lipper average return of less than 2% and the S&P’s return of just under 6%. And in the past three years, TRBCX didn’t just ride the market’s wave, but swam ahead of it while leaving the benchmark behind as well.
As the name implies, the fund invests in a wide range of well-known companies — specifically, ones with big growth potential. TRBCX’s holdings include familiar names like Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), Starbucks (NASDAQ:SBUX), Qualcomm (NASDAQ:QCOM) and FedEx (NYSE:FDX).
Puglia hasn’t lost anything with age, but instead keeps on trucking along. Throw in cheap expenses of 0.77%, and you have a pretty solid foundation.
Note: All returns are based on results as of last quarter’s end.
As of this writing, Alyssa Oursler did not hold a position in any of the aforementioned securities.
Source URL: http://investorplace.com/2012/08/3-longtime-mutual-fund-managers-earning-their-tenure/
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