MAXadvisor Powerfund Portfolios Update
Note to subscribers of the MAXadvisor Powerfund Portfolios: September's feature article has been posted. Subscribers can log in by clicking here.
This month we look at what August's market turmoil means for Powerfund Portfolio investors.
The MAXadvisor Powerfund Portfolios is a collection of seven model mutual fund portfolios ranging in risk from very safe to quite aggressive. Each portfolio is made up of a group of terrific, no-load, low-cost mutual funds that are carefully chosen to work together to lower volatility and increase returns. You can learn more about the MAXadvisor Powerfund Portfolios (and sign up for a free trial if you like what you see) by clicking here.
Forbes Honor Roll
Forbes just published its list of 'Honor Roll' funds for 2007, and while there's not a real stinker in the bunch – this is no buy list. Here are the funds that made the cut, along with our MAXrating for each one:
Bruce Fund (BRUFX) MAXrating: 84
Delafield Fund (DEFIX) MAXrating: 63
Keeley Small Cap Value (KSCVX) MAXrating: 68
Mairs & Power Growth Fund (MPGFX) MAXrating: 80
Muhlenkamp Fund (MUHLX) MAXrating: 61
Osterweis Fund (OSTFX) MAXrating: 77
Perritt MicroCap Opportunities (PRCGX) MAXrating: 93
Stratton Small-Cap Value (STSCX) MAXrating: 70
Third Avenue Value (TAVFX) MAXrating: 85
Value Line Emerging Opportunities (VLEOX) MAXrating: 93
According to Forbes, to get on the Honor Roll "contenders must pass a number of stringent tests. The managers must have been on the job for at least six years; a newbie can't ride on the boffo showing of his predecessor. We also want portfolio diversification. Thus sector funds don't get in. And a fund must be open to new investors." Forbes also looks at how well funds have done through past up and down markets.
But like all top fund lists, this one has its share of problems... ...read the rest of this article»
Obvious Advice of the Week
Scott Burns at MSN Money meets this week's article quota by telling us that when shopping for mutual funds, you're better off going with cheap rather than expensive:
The least expensive one-eighth of large-blend funds had an expense ratio of 0.50% or less and provided an average return of 6.90%. More important, 49 of the 69 funds in the group provided superior returns, so you had a 71% chance of superior performance simply by selecting the least expensive funds."
While this advice might be a bit on the "duh" side for savvy MAXfunds readers, we reckon it never hurts to get a reminder every now and then.
Ask MAX: You call THIS a MAXadvisor Favorite?
Russ Asks:
You call the Vanguard Precious Metals & Mining Fund (VGPMX) a MAXadvisor Favorite Fund, but it has a MAXoutlook of -16%. Why do you call a fund a MAXadvisor Favorite if you think it is going to perform so poorly in the next year?"
How can we like and hate the same fund? We’re not bipolar – here’s how it works:
We give MAXadvisor Favorite honors to at least one fund in every stock fund category. No matter how well we think a category is going to do , we'll try and find the best funds available to you. You'll find a Favorite Fund listed in some categories we think are currently a very bad place to be invested - categories like real estate, Latin America, and yes, precious metals.
Our MAXoutlook is our forecast for a fund’s performance over the next twelve months. This figure is largely driven by our forecast for the fund’s category, the fund’s quality and fees, and the fund’s risk level. Safer funds generally don’t have big negative forecasts even if the category ranks poorly. ...read the rest of this article»
Mad Investors
Barron's online did a comprehensive review of Jim Cramer's Mad Money stock picks, and the results are unsurprisingly mediocre:
Cramer, by all accounts, had a stellar career as a hedge-fund manager. And he is held out by CNBC as the guy who can help viewers make big money. But a comprehensive and careful review of his stock picks by Barron's finds that his picks haven't beaten the market. Over the past two years, viewers holding Cramer's stocks would be up 12% while the Dow rose 22% and the S&P 500 16%, according to a record of 1,300 of the CNBC star's Buy recommendations compiled by YourMoneyWatch.com, a Website run by a retired stock analyst and loyal Cramer-watcher.
We also looked at a database of Cramer's Mad Money picks maintained by his Website, TheStreet.com. It covers only the past six months, but includes an astounding 3,458 stocks — Buys mainly, punctuated by some Sells. These picks were flat to down in relation to the market. Count commissions and you would have been much better off in an index fund that simply tracks the market."
We'd normally advise people to go ahead an watch CNBC's Mad Money because of its entertainment value, but Cramer is so good at making his picks sound like can't miss investments opportunities that even I've occasionally been tempted to fire up E*Trade and dive in. Mad Money no longer sullies my TiVo. I watch Jeopardy instead.
Read Also:
Bring in the Love, Push out the Jive
Lately the market has had more ups and downs than Lindsey Lohan's personal life. CNNMoney.com looks at five no-load mutual funds that have succeeded in capturing market gains while limiting losses during downturns.
2. Third Avenue Value Fund (TAVFX)
4. Neuberger Berman Fasciano Fund (NBFSX)
5. Royce Special Equity Fund (RYSEX)
Of the five, two (Fairholme and Neuberger Berman Fasciano) are currently included in the MAXadvisor Our Favorite Funds list – our hand-picked list of the best funds in each fund category. Jensen is no longer a fund favorite, but was in the past. We recently sold or stake in Fairholme in our MAXadvisor Powerfund Portfolios because the fund has become too popular with investors (thanks to lists like the above…).
We don’t think value in general and small cap value in particular are going to save a portfolio from the next major market downdraft. What worked in 2000-2002 won’t necessarily work today.
MAXadvisor Powerfund Portfolios Update
Note to subscribers of the MAXadvisor Powerfund Portfolios: this month's portfolio performance data update and commentary has been posted. Subscribers can log in by clicking here.
The MAXadvisor Powerfund Portfolios is a collection of seven model mutual fund portfolios ranging in risk from very safe to quite aggressive. Each portfolio is made up of a group of terrific, no-load, low-cost mutual funds that are carefully chosen to work together to lower volatility and increase returns. You can learn more about the MAXadvisor Powerfund Portfolios (and sign up for a free trial if you like what you see) by clicking here.
It's Not All Sub-Prime's Fault
Sure, the sub-prime mortgage mess played a big part in this week's wild market gyrations, but it wasn't the only factor. Charley Blaine at MSN Money says there's plenty of blame to go around, and points the finger at hedge funds, quant models, even the securities and exchange commission.
How Safe Is Your Money Market Fund?
In a market that has seen even supposedly super-safe funds lose upwards of 6% in a single day, are even safer-than-super-safe money market funds immune from getting walloped? Gail MarksJarvis at ChicagoTribune.com writes that while companies that run money markets do everything they can insure that investors in their funds won't lose money, it's not impossible that the sub-prime mess could take a toll:
The models used by Wall Street to design the securities have been a flop. As a result, the securities have plunged in value. Some financial firms are laying low, holding onto the sludge, and hoping that if investors calm down the securities will regain some of their value.
Money market funds are allowed to invest in the mortgage-related securities, but only the safest slices -- or traunches -- of them; such as those rated AAA or AA.
Still, in the current environment, even those slices have lost value, and investors are learning that the top AAA rating on the mortgage-related securities is not akin to AAA in corporate bonds."
But don't panic. While money market funds are not backed by the government, the odds of a money market meltdown are slim:
According to federal rules, the securities within money market funds are supposed to mature quickly -- no longer than 13 months for securities, or 90 days on average for all the investments within a fund. Within those constraints, money market funds can also hold 'illiquid securities' -- or securities, like the mortgage-related bonds. 'Illiquid' means the bonds cannot be sold easily. Of course, in today's nervous market, institutions holding the mortgage-related securities can't find willing buyers at decent prices.
By requiring money market funds to keep risky securities at a minimum, and mandating that most securities mature quickly, the funds have had a reliable track record.
The industry prides itself on guaranteeing that funds "don't break a buck." In other words, if you put a dollar into a fund, you can get that dollar out.
Still, money market funds are not insured by the Federal Deposit Insurance Corporation like bank savings accounts are. So investors cannot take them for granted."
Don't Forget the Little Guy
Jonathan Burton at Marketwatch says that when shopping for mutual funds, don't just go with the big boys like Janus and Vanguard. Smaller fund firms tend to deliver better returns than industry giants:
The best-performing small firms often do better than similarly high-ranking large firms, regardless of whether they own small-cap, midcap or large-cap stocks or follow a value or growth investment style. Forty percent of money managers in the top 25% of their peers have less than $2 billion in total assets under wraps, according to research from financial-services firm Northern Trust Corp.
For investors, the message is that giving money exclusively to industry giants shuts out a large group of talented stock pickers. Broadening horizons to include small firms boosts the odds of finding innovative managers with results in the top 25% of their peers, says Ted Krum, a vice president at Northern Trust who helps institutional clients with money-manager searches.
New research Krum expects to release this fall looked at results over five years through 2006 for managers investing in small-cap and midcap stocks. It found that among firms in the top 25% of their class, the smallest players, handling less than $1.4 billion, delivered returns almost two percentage points better than the giants.
Tiny investment shops returned 16.5% annualized on average in the period, which covered both bull and bear markets, while firms of $1.4 billion to $17.9 billion in size averaged competitive 16% gains, the forthcoming research says.
Performance slipped as assets grew, the study reports. Midsize firms with $17.9 billion to $66.5 billion gained 15.6% on average, while the biggest outfits, managing $66.5 billion to $785.4 billion, posted average gains of 14.7%."
Funds from smaller fund companies mentioned in the article:
Auxier Focus Fund (AUXFX)
Al Frank Asset Management (VALUX)
Berwyn Fund (BERWX)
Berwyn Income Fund (BERIX)
Amana Trust Growth Fund (AMAGX)
Amana Trust Income Fund (AMANX)
Sextant International Fund (SSIFX)
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