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Nothing is simple anymore. Take value investing, for example.This strategy used to be cut-and-dried. Basically, portfoliomanagers bought good companies selling at low multiples--in otherwords, on the cheap. Today, however, not all value funds arecreated equally. Just look at the Thornburg Value Fund. It'sgot a mind all its own.
Bill Fries, portfolio manager of the Thornburg fund, cuts abroad cloth when he's shopping for companies in which to investthe fund's assets. "We look at low price-to-earnings, lowprice-to-cash, above-average dividend yield and that kind ofthing," says Fries, who has been at the fund's helm sinceits inception in 1995. "But we also buy consistentgrowers--blue chip stocks. And we have a small portion of theportfolio in emerging companies."
Why does Fries invest in so many different types of companies?First, he wants to build a diversified portfolio of securities. Andsecond, he says there are different contexts of value. "Aconsistent grower, for instance, may be a company that's spentbillions of dollars over decades building its name--and that hasvalue," he explains.
But that kind of value isn't easy to quantify, especiallyfor by-the-book value thinkers.
PepsiCo is an example of a consistent grower that's in thefund's portfolio. Many value fund portfolio managers wouldnever consider it a value buy. One reason: At the time this piecewas written, it was selling at about 24 times earnings, and a lotof value camp people would find that too pricey. But not Fries."Given the profit-ability of the enterprise and the coreFrito-Lay snack food franchise along with the Pepsi beveragefranchise, there's value in there," he says.
Then there are the emerging franchise companies you'll findin the fund, fast growers like Advent Software, Fox Entertainmentand Novellus System. They're in the fund because, says Fries,"Growth is not a dirty word to me."
The portfolio contains about 47 stocks, and total holdingswon't vary much beyond that; Fries wants "every stock tocount." And count they have. The fund's average annualtotal return has been well over 27.52 percent, despite the factthat the value stocks have been down and are still rebuilding.
Look at the fund's asset allocation and you'll findnearly 21 percent in-vested in technology stocks, 6 percent infinancial institutions, 7 percent in investment management firms,and the rest in everything from rail-roads to travel servicecompanies.
No matter what type of company this manager selects, there'sone rule of thumb he follows: Buy the stocks when they're outof favor. So even though Fries has stretched the meaning of valuebeyond what some might consider its natural state, he's firm onthat front.
On the risk meter, even though the Thornburg Value Fund'sdiversity of value-type holdings might provide shareholders withsome cushion as market tides turn and performance winners see-sawbetween growth and value stocks, it's not risk-free. But maybethe game isn't so much one of choosing between the two as it isof finding the priced-right winners.
Dian Vujovich is a nationally syndicated mutual fundcolumnist and author of 101 Mutual Fund FAQs (Chandler HousePress). For free educational mutual fund information, visit her Website, http://www.diansfundfreebies.com
At A Glance
Fund Name: Thornburg Value Fund (TVAFX)
Managed By: Thornburg Investment Management
Portfolio Manager: Bill Fries
Total Assets: $615 million
Top Holdings: Atlantic Richfield, Bell Atlantic, Genzyme,Nortel Networks and US West
Average Annual Return: 27.52% since its inception in1995.
Maximum Load: 4.5%
Total Expense Ratio: 1.4%
Minimum Initial Investment: $5,000 ($2,000 for retirementaccounts; $100 per month for automatic investment plans)
Management Fee: .88%
Phone: (800) 847-0200
Web site:http://www.thornburg.com
