Wednesday was likely a busy one for many option traders that focus on IBD 100 stocks. With volatile price swings, earnings and increased premiums across-the-board, there were plenty of reasons for considering adjustments and perhaps opening fresh positions as well. In the following, we’ll recap a couple of the more extreme regions of that particular universe. In front of this evening’s earnings release, Apple () saw a surge in options activity and in its risk premiums. On the day,...
We’d Love These Funds If They Were Cheaper
Posted in realty | Thursday, July 26th, 2007 | Trackback
It’s certainly no secret that we believe that investors should pay a lot of attention to costs as they evaluate and select funds. Indeed, we score funds on their fees as part of our http://quicktake.morningstar.com/DataDefs/StewGradeMethodology.pdf. We insist that our http://news.morningstar.com/article/article.asp?id=119730&_QSBPA=Y be at least reasonably priced and strongly prefer that they be attractively priced. And we’realways wary of funds that are expensive.
The reason is straightforward: Low expense ratios are one of the better predictors of long-term success for funds, and high expense ratios are ongoing and tough burdens for funds to bear. However, we also recognize that a limited number of funds have been able to achieve real success despite being somewhat pricey, and we’re mindful of the fact that expense ratios aren’t set in stone. In fact, several factors including asset growth and changes in fee structures can lead to lower costs. That’s why we don’t totally dismiss or ignore funds whose high cost are their only meaningful shortcomings.
With that in mind, we’re keeping a close eye on four domestic-equity funds that have notable strengths as is but that would become quite compelling if their expense ratios declined significantly. Please note that this is not an exhaustive list of such funds and that we’ll cover international-stock and fixed-income funds with these traits in future columns.
http://quicktake.morningstar.com/FundNet/MorningstarAnalysis.aspx?Country=USA&Symbol=CHCGX http://quote.morningstar.com/Switch.html?ticker=CHCGX
This fund has several positive attributes. Whit Gardner and John Lewis have run this large-growth fund since it opened in 1997 and had more than 10 years of investment experience prior to that, including a few years as analysts at the well-respected growth boutique Friess Associates. Gardner and Lewis follow a distinctive growth discipline and never waver from it. And while their dedication to their strategy has hurt at times, they’ve delivered excellent long-term returns with it here. All that’s encouraging–and there are certainly grounds for long-term optimism–but the fund’s expense ratio is nearly 40 basis points higher than the median for no-load large-cap offerings, and that’s a significant blemish.
http://quicktake.morningstar.com/FundNet/MorningstarAnalysis.aspx?Country=USA&Symbol=TGFFX http://quote.morningstar.com/Switch.html?ticker=TGFFX
It’s too bad that this fund has an expense ratio of 1.38%, whereas the median no-load large-cap offering has an expense ratio of 0.98%. The fund stands out from the rest of the large-blend category because Tim McKissick and John Snyder focus on 25-35 names and readily build big sector weights as they pursue companies trading below their estimates of their intrinsic values. This concentration naturally leads to some rough spells, but the managers have produced strong returns since this share class opened in late 2004 and since an older share class opened in 2001. The fact that the managers have also earned good longer-term results at a less-focused large-blend fund is another plus.
http://quicktake.morningstar.com/FundNet/MorningstarAnalysis.aspx?Country=USA&Symbol=BARAX http://quote.morningstar.com/Switch.html?ticker=BARAX
This fund boasts several strengths. Lead manager Ron Baron has been at the helm since this mid-growth fund opened in 1987–and he has 15 years of experience running another mid-growth offering and 12 years of experience running a small-growth fund–so he’s one of the most-seasoned smaller-cap-growth managers around. The patient and price-conscious strategy he follows here has a lot of appeal. And he has executed his measured approach well in a variety of conditions, so the fund has earned good risk-adjusted returns over the shorter and longer terms. In fact, all that keeps the fund from being a truly topnotch mid-growth offering is its expense ratio, which is almost 20 basis point higher than the median of 1.15% for no-load mid-cap offerings.
http://quicktake.morningstar.com/FundNet/MorningstarAnalysis.aspx?Country=USA&Symbol=FFSCX http://quote.morningstar.com/Switch.html?ticker=FFSCX
There’s no denying that this fund has a number of attractive features. Irene Hoover has been in charge since the fund opened 1998, and she ran another small-growth offering for a few years prior to that, so she has ample experience. Her price-conscious growth strategy, which favors financially healthy companies that dominate their industries and have strong cash flows, is sound. She has produced good risk-adjusted returns with that strategy here and did the same at her former charge. However, the fund’s expense ratio is more than 40 basis points higher than the median for no-load small-cap offerings, and that’s a substantial flaw.
