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Sep29
Barron's/Value Line Equity Mutual Fund Survey

What do John Connor, Bruce R. Berkowitz, Kenneth Heebner, Daniel B. LeVan and Thomas Callan have in common?  They top the chart for the annual Barron's/ValueLine equity mutual-fund survey in the 2006 edition.  On a risk adjusted basis these gentlemen added the most value to their mutual-funds of any manager qualifying to be considered.

These men run the Third Millennium Russia, the Fairholme Fund, the CGM Focus Fund, the Boston Company International Small Cap Fund, and the BlackRock International Opportunity Inv A Fund. 

Since it is a mantra on Wall Street that past performance does not guarantee future performance, why should we care about stellar past performance?  It depends on whether you feel the managers at a fund make a difference and can adapt their strategies to new conditions. 

 

A couple of the managers have shown up repeatedly in the top 100 (of 505 that made the cut).  But there is large turnover in where in the top 100 they end up.  And there are many newcomers each year.  

What do you think?  Do you try to find the best managed mutual funds to invest in? 

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2 Comments/Trackbacks




Of those fund managers mentioned, I've heard of only two (three, actually, if you count Berkowitz, which was the real last name of the notorious "Son of Sam" serial killer, but I don't think his first name was Bruce, so that probably isn't the same guy, now rehabilitated or reincarnated...

Apart from the shared recognition of "adding greatest management value" to their respective equity mutual funds, was there any other thread, trend, type, timing or other similarity of style common to all of these successful fund managers or to the mutual funds they manage? Was there a meaningful average rate of correlating outperformance achieved by these guys over their competitors? Are the mutual funds themselves of similar size or type (load vs. no-load, emerging market, international, energy-weighted, etc.)? How meaningful, comparable, or predictable, are these common results? Or is this nothing more than another interesting observation (but meaningless exercise) in "random walk" theory?

Three of them are international funds. I predicted with our large deficit that the dollar would do poorly and most of the gain in EAFE and some of it in emerging markets has come from currency gains. One of the funds has its largest holding as Berkshire Hathaway and Fairholme follows the Grahm/Dodd style of investing like Warren Buffett does. That style of investing underperforms in bubble markets and out performs in uncertain markets where there are value names to be found at a margin of safety below their intrinsic value.

Mostly though, I was questioning whether their performance was due to skill or to being in the right place at the right time. A rising tide lifting the ships so to speak. So I probably was making an interesting observation but trying to elicit meaningful dialoge on the random walk theory not meaningless exercise. My walking 5 miles every day is meaningless exercise.

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