Category Archives: Mutual Fund Commentary

Sideways Markets

By Charles Lynn Bolin

Every strategy should be evaluated not just on a “benefit of being right”, but at least as importantly, on a “cost of being wrong”, basis…

– The Little Book of Sideways Markets, Vitaliy N. Katsenelson

I just finished The Little Book of Sideways Markets (2010) by Vitaliy N. Katsenelson. Mr. Katsenelson is a value investor, an author and CEO of a small but classy Colorado investment advisor; he offers a singularly engaging personal bio on his well-read Contrarian Edge blog. His two books cover the same ground, but are written for different audiences: professional (Active Value Investing) and lay (The Little Book of Sideways Markets). His concern here is with markets that can go up and down for 10 or 20 years and end up near where they started. In this article, I look at investing in a turbulent market which I believe will occur over the Continue reading →

Emerging Market Value investing revisited

By David Snowball

About a year ago we identified emerging markets value funds as one of the market’s few bright spots, at least if valuations are important. (And they are.) Since we published that story, three things occur to us.

  1. Some emerging markets value funds have, indeed, done well.
  2. The long-term case for emerging market value remains strong.
  3. The options for prospective EM value investors have become clearer

Continue reading →

Launch Alert: Grandeur Peak Global Contrarian

By David Snowball

Grandeur Peak Global Contrarian Fund (GPGCX) launched on Tuesday, September 17, 2019. It is Grandeur Peak’s first fund launch since 2015. Like the other core Grandeur Peak funds, Global Contrarian is capacity-constrained and will, in all likelihood, be closed to new investors in relatively short order. The exact strategy capacity, the Grandeur Peaks folks tell us, is hard to pin down because it’s affected by the liquidity of the names in the portfolio and the demands from some of the other GP funds whose portfolio overlaps it. Certainly more than $100 million, likely well under $300 million.

Of the seven Continue reading →

September 1, 2019

By David Snowball

Dear friends,

Egad! The fall semester has begun and my campus is swarming with students! Worst of all, they expect me to have something sensible to say at 8:30 Tuesday morning.  I’m doomed!

Snowball elsewhere

For those of you thinking, “yes, that’s all well and good, but what does Snowball sound like? Does he have an annoying twang in real-life like he does when I hear him in my head? I’m sure he’s got a guilty-looking Continue reading →

Adjusting Portfolios for the Business Cycle

By Charles Lynn Bolin

I appreciate the opportunity to write for Mutual Fund Observer. I am a great fan of MFO, and it is my primary investment tool. I am a small investor, an engineer with a MBA nearing retirement. I spent the majority of the past dozen years working overseas and used my spare time reading about history, economics, forecasting, and investing.

The data used in this article is current as of July 2019. As of August 24th, the S&P 500 has lost 5% bringing the 12 month return down to 1.5%. Meanwhile the Vanguard Total Bond Market (BND) is up 10% over the same period.  In this article, I look at risks to the financial markets and economy, how funds with varying allocations to stocks have done over the past 20 years, identify 36 top low risk funds with high risk adjusted returns, and create three hypothetical million dollar portfolios based on the current environment. Continue reading →

Launch Alert: Harbor Focused International

By David Snowball

On May 31, 2019, Harbor Funds launched Harbor Focused International (HNFIX/HNFSX). Harbor has eight international and global funds, of which three were either launched or relaunched this year. HNFIX is the most recent of those innovations.

Harbor Focused International will pursue capital appreciation. The fund will invest in 25-40 stocks from developed and emerging international markets. It will be an all-cap portfolio (minimum cap is just $1.5 billion) that is benchmark-agnostic. As a result, it might substantially overweigh some regions, sectors or styles if that’s what Continue reading →

Briefly Noted

By David Snowball

Updates

Three advisers are vying for this month’s “they’re doing what? Did I read this right?” award for moves where we were, literally, reading the filings aloud, slowly, to be sure we weren’t missing something.

Nominee #1 BlackRock

BlackRock Focus Growth (MAFOX) will undergo “a reorganization with another BlackRock-advised fund” in the fourth quarter of 2019. In the reorganization, the $1 billion, Continue reading →

August 1, 2019

By David Snowball

Dear friends,

Welcome to our annual summer seersucker edition of Mutual Fund Observer! Lots of folks are on vacation – we got nearly 200 “I’m on vacation! Huzzah!” auto-replies to our monthly announcement – and lots of folks are coping with unprecedented heat. The triple digit temps that toasted about two-thirds of the US in mid-July are being repeated across Europe now.

American cities are poorly prepared for heat waves; European cities are far more poorly constructed for them since their summer highs used to be 10-20 degrees cooler than what’s typical in the Continue reading →

Mauritius Madness

By David Snowball

The word of the week is “Mauritius.”

For those of us who dozed through World Geography we’ve highlighted the country in question.

Google kindly offers the following snapshot: “Mauritius, an Indian Ocean island nation, is known for its beaches, lagoons and reefs. The mountainous interior includes Black River Gorges National Park, with rainforests, waterfalls, hiking trails and Continue reading →

Funds for Muslim investors

By David Snowball

One of the charms of our country is all of the stuff we don’t ask. Our federal census does not, and has not since the 1950s (quick thanks to David Moran for his insight into census history), asked people about their religious preference or practices. That’s good because it’s none of the guvmint’s damned business. It’s also bad because religion is an important element of our individual and collective culture; in the absence of official estimations, a host of (sometimes laughably inept) unofficial calculations substitute.

The Pew Research Center (2018) estimates that there are “3.45 million Muslims of all ages living in the U.S. in 2017, and that Continue reading →

Steven and Sisyphus

By David Snowball

Active management, as a discipline, is hard.

Active management, as a sustainable business, is harder.

Active management, as a sustainable business run by an independent investment boutique, no matter how skilled, is crazy hard, getting crazier and getting harder.

When, on top of all that, it feels like a megalithic corporation has it out for you, you’d surely feel like it’s time to surrender and put Sisyphus on the Continue reading →

Overachieving defenders: Your late-cycle shopping list

By David Snowball

Investors are pulled by three competing forces just now.

Force One: The market is going to crash soon enough.

Longest bull market in US history. Valuations, based on 10-year CAPE or Shiller average, have only been higher twice in market history: 1929 and 2000. Record earnings, which make stocks look cheaper, are starting to wobble. Economic policy is being made by tweet by a guy still in his jammies. Trade war. Brexit. $1,200,000,000,000 federal budget Continue reading →

Bright guys saying dumb things

By David Snowball

I’m inured to stupid stories (“12% annual returns from a three-stock portfolio allow smart investors to retire at age 24 with $12 million!”) originating from “financial journalists” that no one has ever heard of. Those folks exist because the news hole has become a black hole.

The “news hole” is the amount of space, in a newspaper or magazine, or time, in a news broadcast, available for the news of the day. It used to be a constraining factor: if you only have 23 minutes (or 400 column inches) a day available, you had to make editorial judgments about what was Continue reading →

Launch Alert: Vanguard Global ESG Select Stock Fund

By David Snowball

On May 21, 2019, Vanguard launched its Global ESG Select Stock Fund (VEIGX/VESGX). The fund is subadvised by Wellington Management. It is Vanguard’s fourth socially-screened product after FTSE Social Index (VFTSX), ESG U.S. Stock ETF (ESGV) and ESG International Stock ETF (VSGX). Vanguard funds sponge up money pretty promptly: Social Index, launched in 2000, has $5.6 billion but the domestic and international ETFs are under a year old and have gathered $570 million and $380 million, respectively. Morningstar likes them all.

Matthew Brancato of Vanguard claims the fund “is taking a distinctive approach to ESG investing, seeking long-term outperformance through the selection of companies that integrate leading ESG practices into Continue reading →

Briefly Noted . . .

By David Snowball

Updates

The ETF industry has continued to distinguish itself for its almost laughable me-tooism. The themes of the day are marijuana (ETFMG Alternative Harvest ETF MJ, AdvisorShares Pure Cannabis ETF YOLO, AdvisorShares Vice ETF ACT which splits time between tobacco, pot and alcohol, The Cannabis ETF THCX, Cambria Cannabis ETF TOKE, Amplify Seymour Cannabis ETF CNBS, Cannabis Growth Opportunity Corp CWWBF) and pets (and pet parents). There are even articles now on the top marijuana ETFs for 2019 and the best marijuana ETFs for conservative portfolios. Uhhh … note to conservative investors, (1) the oldest and largest of these ETFs substantially trails the Vanguard Total Stock Market over the past three years yet has triple the volatility and (2) possession of marijuana is still a federal crime. Continue reading →

July 1, 2019

By David Snowball

Dear friends,

It’s not yet the height of summer, but it’s starting to feel like it at Augustana. Our summer classes, held only in June, have ended and the hubbub of the new year is still a distant cloud on the horizon. I visit campus to catch up on my reading – it’s what scholars do – and to pursue bits and pieces of administrative work for my dean. Rather than camp in my office all day, I wander around at lunchtime and recently discovered our always-bustling patio and picnic lawn look Continue reading →

The Rise of the Active ETFs

By David Snowball

Active ETFs are a sort of hybrid between more-traditional ETFs and actively-managed mutual funds. Like traditional ETFs, they trade on the secondary market which means that the advisor doesn’t need to keep cash on hand in order to meet day-to-day withdrawal needs. Some of the expenses traditionally borne by the advisor either don’t exist (ETFs have fewer shareholder reports than, by law, mutual funds do) or are shifted to the brokerage firm. They also offer a structural tax advantage: shareholders aren’t responsible for the yearly tax consequences (and record-keeping) of the manager’s moves; shareholders are taxed only when they Continue reading →

Launch Alert: Harbor International Small Cap (HIISX)

By David Snowball

On May 23, 2019, Harbor Capital Advisors did a hard reset on Harbor International Small Cap (HIISX). Over its first three years, the fund’s returns trailed nearly three-quarters of its peers with only a tiny bit less volatility. Harbor chose to empanel a new subadvisor, Cedar Street Asset Management which was founded in April of 2016, is an employee-owned investment management firm and has $220 million in assets under management as of May 31, 2019. Since Cedar Street brings a distinct strategy that has little in common with their predecessors, MFO classifies this as Continue reading →