My mailbox is filled with semiannual reports from a multitude of Vanguard’s funds and mutual fund managers. I thought you’d find some of their comments enlightening and encouraging. On the whole, I’d say cautious optimism is the theme that runs through these reports. Here is a sampling, along with my opinions and recommendations.
Capital Value‘s Peter Higgins sounds a fairly bullish note in his letter to shareholders. He says that as financial stocks have rebounded, he’s finding them less compelling, but that health care and technology companies are presenting some “intriguing” ideas for investment. The fund’s other manager, David Palmer, says his portion of the portfolio suffered due to poor selections in consumer discretionary and materials companies, while these same sectors apparently boosted performance on Higgins’ side of the fence. Both managers flew high with Delta Air Lines. Palmer said he’s trimmed his airlines stocks, while Higgins didn’t comment either way.
Capital Value’s highflying returns may have been tempered with the addition of a second manager to the fund. Since Palmer came on board, the portfolio has about doubled from less than 70 stocks to anywhere from 135 to 147, and that doesn’t take into account overlapping positions like the aforementioned Delta, which is currently the sixth-largest holding in the fund. Still closed to new investors, I continue to see this as a wait-and-see option in the mid-cap space.
A stronger-than-anticipated economic recovery is what the Wellesley Income managers from Wellington Management think is in store for the U.S. The biggest headwinds, they say, will continue to come from the real estate markets. Of interest is the fact that Michael Reckmeyer, who runs the equity portion of the portfolio, says he remains keen on oil giant Total SA, a stock that underperformed and that his colleague Don Kilbride sold from Dividend Growth.
Wellesley Income is a terrific fund for those more interested in income than growth. That being said, I’d almost always take Wellington‘s greater equity stake over this fund’s greater income allocation. With interest rates more surely poised to rise, rather than fall, I’d double that motion.
After almost five years of underperformance, Growth & Income is beginning to regain ground lost against 500 Index. The question is whether the “significant enhancements” made to the fund over the past half year or so will be long-lasting or not. Oliver Buckley, whose company, Franklin Portfolio Associates, was acquired by Mellon Capital (the folks behind Asset Allocation), notes that there’s been something of a meeting of the minds (or the computers) between him and his new colleagues. The proof will be in the pudding at this quantitative fund, but for the moment I’m reticent to give an all-clear after years of disappointment. My Sell rating stands.
The One ETF to Own Now. Louis Navellier’s new profit guide reveals the hottest ETF to buy now, plus details his breakthrough new strategy designed to help you lock in short-term gains from ETFs in sectors just heating up, and then when those sectors are on fire, grab money-doubling profits from the fastest-moving individual stocks. Get your FREE copy here!