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If you've never heard of the White Oak Growth Stock Fund, you're not alone. Around for just a little more than six years, this nondiversified growth fund is just starting to garner national attention, thanks to its plucky annual performance numbers: Since its inception in August 1992, the fund has returned, on average, nearly 19 percent annually to its shareholders.
"I didn't say 19 percent; I said 18.91 percent," says Jim Oelschlager, the fund's lead portfolio manager, who insists on sticking to precise numbers. There's no rounding up for this Akron, Ohio, money manager--he lets the facts speak for themselves.
No matter how you slice it--19 percent for the life of the fund or 22.27 percent for the past five years--the numbers are impressive. And when you consider that at press time the fund only had 24 stocks in its portfolio, its performance looks even better.
Nondiversified growth funds like White Oak typically have only one or two dozen stocks in their portfolios. And although they've been around just as long as diversified funds, the extended bull market has brought a number of them to the foreground.
In a nondiversified fund, if one stock out of 20 triples in price, the fund's performance could soar--particularly if the fund has a big holding in that company. But impact comes with a cost. Nondiversified funds are riskier than diversified ones. If the portfolio manager's stock picks are right on, the fund's performance numbers will reflect it; if their picks are poor, the fund's performance will be, too. There's no hedging your bets in a nondiversified fund--things generally either work out well or fail miserably.
That said, the three industries Oelschlager was investing the fund's assets in in mid-July were technology, health care and finance. He likes to buy companies with strong future earnings and growth expectations at attractive prices and hold on to them as long as possible. Last year, for instance, the fund had a portfolio turnover rate of just 8 percent--very low by industry standards.
Because the fund invests primarily in large-cap domestic companies, most of the stocks in its portfolio are names you're probably familiar with, like American Int'l Group, Ascend Communications, Ciena, Cisco Systems, Citicorp, Merck, Morgan Stanley Dean Witter, and Pfizer.
"Our objective is to do better than the S&P," says Oelschlager. "And I think that if you really want to do well, you've got to be a little more aggressive, play offensive ball and keep your expenses low." So far, he's met his objectives.
White Oak Growth Stock Fund isn't for the faint of heart--nondiversified funds typically aren't because they can be so volatile. So even with its five-star Morningstar rating, the fund hasn't been around long enough to see how it would weather bear or flat market conditions. But for those who want to play the mutual fund game a few dozen stocks at a time, White Oak's past performance is hard to beat.
Dian Vujovich is a nationally syndicated mutual fund columnist and author of Straight Talk About Mutual Funds (McGraw-Hill), Straight Talk About Investing for Your Retirement (McGraw-Hill), and 10-Minute Guide to Stocks (Macmillan).
At A Glance
Fund name: White Oak Growth Stock Fund
Managed by: Oak Associates
Portfolio manager: Jim Oelschlager
Holdings include: Cisco Systems, Merck, Morgan Stanley Dean Witter
Total assets: $712 million
Average annual return: 18.91% (since its inception in August 1992)
Management fee: 0.98%
Minimum initial investment: $2,000
Phone: (888) 462-5386
Figures are as of 9/4/98.