If you were to tell me that you could buy just one Vanguard fund—or indeed, one fund in any family—this is what I’d tell you: Buy Vanguard Selected Value. This is a fund that pretty much guarantees you two things that I think you’ll value. One is a good night’s sleep. In a world where madness stalks, the value of discipline, logic and accountability is great. That is one reason subscribers to The Independent Adviser for Vanguard Investors have loved this fund since I began recommending it.
The second reason is…and this even surprises investors in the fund…a very impressive performance. Selected Value has an average annual return of 14.1% over the last 5 years (not to mention it’s up 24.2% in the last 12 months).
What’s the secret? Well, if Warren Buffett has a long-lost brother, his name is James Barrow. And Barrow is Selected Value’s secret. You see, Barrow doesn’t “pick” stocks, any more than Buffett does.
He collects, and owns, companies. Companies that are simple. That have high current cash flow. That you can buy and hold for a long time. That are unaffected by business fads. That boast yields 150% greater than the index, price-to-book that’s two-thirds of the index, and P/Es that are 35% less than the index.
Like a great athlete, Barrow makes his results look effortless, graceful and deceptively easy.
He knows, in Jack Bogle’s words, “the majesty of simplicity.” Which may account for his ability to rise above market turmoil and deliver such stunning results, so consistently.
If you are a Vanguard investor, you are blessed to have access to James Barrow. But be careful. In the fund he’s best-known for, Windsor II, you only get Barrow at “half-strength.” Yes, Windsor II is a great fund, but he has another fund, much smaller, and it is all Barrow, and leaping ahead right now.
As you can tell, I admire Barrow hugely. I’ve studied him all through the 1990s, and there was never a time when he strayed from very clear principles. Others derided him when technology took off in 1998 and 1999—just as they denounced Warren Buffett. But today, again like Buffett, Barrow has been totally vindicated.
Vindicated with boring food companies, dull utilities and unglamorous retailers. All bought for cents on the dollar. All making huge profits. In Buffett’s own self-deprecating words, “Contain your excitement.”
What if you already own Windsor II? I think it’s fine, but I want you to consider adding Selected Value to your portfolio.
I am so enthusiastic about Selected Value that I am putting a great deal of my own money…my family’s money…and the money of my wealthiest clients into it. That’s how much I believe in James Barrow and his own fund.
