Barron’s Fund Quarterly (2021/Q4–January 10, 2022)

yogibearbull

This is trial post here.

Pg L4: COVER STORY, “The Commodities Boom/Why It’s Time to Invest in COMMODITIES, and How to Do It”. Factors driving commodities include inflation, China and energy transitions. Bloomberg commodity index rose +27% in 2021 and more gains are ahead, especially for oil and ag-commodities. INFLATION is driven by pent-up demand and constrained supplies due to supply-chain disruptions. Greenflation is also contributing as the ESG movement has costs. CHINA is a huge consumer of commodities, and it is slowing. Its property sector is in trouble. Yet, commodities need China. ENERGY TRANSITIONS and ESG are driving the demand for several commodities. Rising energy and other prices feed into higher AG-COMMODITY prices. Plant substitutes for meats are boosting demand for several ag-commodities. WEATHER has been difficult in many areas. Most commodities are in BACKWARDATION (i.e., the prices of near-futures are higher than those for far-futures); futures-based commodity funds benefit from backwardation during their periodic future rolls. It is hard to find active commodity funds but an article in FundQ mentions 3.

Pg L7: COMMODITY indexes vary widely. The S&P GSCI commodity index has 60% in energy; the Bloomberg commodity index has 33% in energy, 33% in metals. Yet neither has lithium, copper, tin, metals essential for electrification. So, use active commodity funds such as PCRAX, CCSAX, BCSAX; indexed/passive funds are more common. Beware that commodity funds are volatile.

Pg L8: Be aware of several changes coming for 401k: More ESG options including the default options; guaranteed-income option (immediate or deferred/QLAC) at retirement included within the target-date funds (TDFs); pooled employer plan (PEP) 401k for small businesses. On the other hand, the Backdoor Roth IRA loophole will be closed. (This long piece is by @LewisBraham)

Pg L10: Amy DOMINI of Domini Impact Investments (AUM $3 billion in 5 funds) was an early ESG pioneer (Domini 400 Social Index/MSCI KLD 400 Social Index, KLD Research & Analytics that was bought by MSCI, books, etc). PERFORMANCE of ESG funds doesn’t lag general funds; in fact, they have better risk-adjusted performance. There is now appreciation that ESG is everybody’s business. There is work still to be done on ESG STANDARDIZATION and Europe is ahead on this. The SEC needs to get into this; the DOL is cleaning up the mess that it has created. Her funds use a combination of exclusions and inclusions based on ESG criteria (featured fund is DSEPX). They also use industry specific ESG standards. She notes that although Larry FINK of BlackRock/BLK makes lots of noises on ESG, BLK has a record of mostly voting with managements (Larry Fink/BLK declined comment). Her recent book, People, Planet, & Profit, November 2021.

Pg L36: In 2021/Q4 (SP500 +10.90%): Among general equity funds, the best was LC-core +9.80% and the worst was SC-growth +1.84%; NO category beat SP500. Among other equity funds, the best was real estate +14.42% and the worst was Japan -4.25%. Among fixed-income funds, LT -0.01%, world income -1.19% (not very refined in Lipper mutual fund categories listed in Barron’s).
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sma3

I have had sig Commodities esp energy since last year's oil crash. A lot of the ETFs are too heavy in Oil to be a diversifier, so I added DBA for agriculture and GMET for "green metals" REMX for "strategic metals"

For broad based funds, I still think SPACX is a decent fund, although it paid a huge income distribution this year, presumably due to profits on futures. It is less volatile than those mentioned above with lower draw downs in 2020 ( 28 % vs over 50%)

There are lots of alternatives but look carefully at how the mange risk

Guy

Thanks for the summary Yogi.

Observant1

@yogibearbull,

I appreciate the time and effort expended to create your Barron's summaries.
Thank you.

Crash

ditto.

BaluBalu

Why is the OP a trial post?

yogibearbull

BaluBalu said:

Why is the OP a trial post?

I have participated in discussions here and started a handful of OPs. But I do produce content that is published elsewhere. In my recent communication with @David_Snowball, I suggested that I can tryout some content here and see how that was received/perceived by the community here. That is why I prefaced the OP as a trial post. I won't say anymore. May be David can add comments about the various ideas he has as he reduces his role at this site.

MikeW

@yogibearbull. This is a really valuable summary. Thx so much for taking the time to read and provide us the key points from the articles. I would value seeing this in the future. I often will read a couple of articles myself But don't have the time to go through the whole magazine.

MikeW

@sma3. Thansk for posting on commodity funds. I cant seem to find SPACX. Is the symbol correct? Also is this your favorite broad based commodity fund?

Mark

@MikeW - SPCAX is the advisor class of SPCIX

MikeW

Thanks @Mark

hank

I read the entire excellent magazine of course. Haven’t had a brokerage account for a full year yet, So, never owned stocks before. (Fraught with peril of course). But ISTM Barron’s makes some good calls. My small entry into RIO came in September of ‘21 after a major Barron’s piece to the effect that all the big multi-asset miners were screaming buys. They had plunged in recent months. RIO (mentioned again this week) was 1 of 6 or 8 covered. I bought NGLOY & RIO after that. Eventually dropped NGLOY and added to RIO. It’s one of the more conservative companies with a great balance sheet. RIO has continued to climb this week.

One that “got away” was Y (Alleghaney) a conglomerate with a lot of insurance holdings. I didn’t bite when Barron’s highlighted it a couple months ago. It’s continued to gain ground - even on days when equities sold off big time. I’m guessing those insurers are able to invest their monies at better interest rates.

Crash

Helluva div. on RIO, I see. I'm still holding onto ENIC in Chile. Can't technically explain the big fall since I bought, but it's back up to $2.00 today..... I bought at $2.97. I thought THAT was a bargain at the time. I might add more shares after the (very small) upcoming div. The MAIN div. will be in May. If that booger will go to $4.00 for me, I'll be extremely pleased. The utility was forced to buy natgas at very high prices. Drought down there. Sorry, I just hijacked this thread.

yogibearbull

Conversation on RIO here is continuation from another thread (TMSRX).

JonGaltIII

Yogi summaries are valuable. I have a digital subscription to Barron’s but inevitably seem to miss articles of interest. One such example is @LewisBraham post on changes to the 401k. Content on the potential back door Roth elimination is important to me. The addition of annuities to the 401k… I wanted to see if the story would address what happens to your annuity when you pass. It covered the topic. Good content

“One of the behavioral reasons why people don’t want to select an annuity is they feel that ‘if I give you this money and I pass away in a year’s time, then I’ve lost the money,’ ” says Nick Nefouse, BlackRock’s head of Retirement Solutions. “The way we’ve structured this is your dependents will continue to receive the money to take that [anxiety] off the table.”

Your 401(k) Has Quietly Undergone Significant Changes. What to Know.
https://www.barrons.com/articles/401k-changes-three-major-additions-one-loss-51641495748