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rare long-form interview with primecap (about once every 5 years)
some good & reassuring insights never expressed before, but i felt morningstar missed a key question : 'with all partners taking a similar GARP selection approach, how will primecap execute risk-weighted concentrated investing in a new era (interest rates ending a 3+ decade decline) ?' a partial response was that primecap spends more time on sell decisions.
this is an interesting question, because it also affects other very good active GARP equity managers like Giroux at T.Rowe Price (who adjusts some with other assets). the most successful GARP investors succeeded by holding even when the stocks looked overvalued and far past the initial buying range, which got turbocharged in a multi-generational interest rate decline.
Really interesting for investors who own Primecap-managed funds. I've been with VPCCX for an awfully long time, my major regret being that I hold it in a taxable account which hasn't been ideal. Used to own POAGX, too. That fund had an uncanny ability to invest in companies that were bought out, and perhaps they still do given recent developments involving Splunk and Seagen. Alas, many or most of those successes have been offset by positions that went precisely the other way (Nektar and BlackBerry come to mind). All of their funds have been experiencing net redemptions for several years now.
I noticed the RIMM (Reserach in Motion) now BB is no longer in their top 24 holdings. They held a strong conviction in this stock. To me this would have been a good interview question:
I own VHCOX and POAGX...holding tight as well. Thanks for the link.
Yes, those are two of my longest term holdings as well. Primecap was actually the first fund I ever owned dating back to the mid-80's, as my first job was with a company headquartered in King of Prussia, PA. whose founder and CEO was apparently familiar with this Bogle fellow.
This was a good interview where I learned more about the Primecap's team operations and philosophy. Thanks for posting!
I completed a Vanguard survey earlier today and the firm apparently is considering reopening the Primecap and Capital Opportunity funds: "Vanguard is considering reopening a fund that has been closed or limited to certain investors for the last decade. Here is information about this fund: Vanguard Capital Opportunity Fund – Capital Opportunity is an active, aggressive growth fund that invests in companies of all sizes across market cap (large, mid, & small) primarily in the US. The PRIMECAP manager expects that these companies will grow over time but may be volatile in the short-term."
I own VPMAX and VPCCX but don't own VHCAX. Someone who owns only VHCAX reported that reopening VPMAX was mentioned in his Vanguard survey.
The following survey question really piqued my interest: "Does the Vanguard PRIMECAP investment limit of $25,000 per year impact your investment decisions?"
Well, yes it does. I'd exchange my entire VPCCX investment for VPMAX if Vanguard allowed it.
Question for Primecap heads. My daughter can invest in VPMAX or a very low fee total market fund in her 401k. She has no interest in investments and maxes out her 401k every year. She pays no attention. What would be better for the next 30 years?
This decision really depends on the individual investor. Actively managed funds may underperform the broader market for several consecutive years and returns could be "lumpy." For example, VPMAX lagged the S&P 500 and Russell 1000 indexes in 2019, 2020, and 2021. An investor incapable of tolerating subpar short-term performance could sell at an inopportune time. This individual would probably be better off investing in low-cost broad-based index funds. Having said that, I really like the Primecap management team and VPMAX in particular. A 30-year analysis (Jan. 1994 - Dec. 2023) of Vanguard PRIMECAP, Vanguard Total Stock Market Index, and Vanguard 500 Index can be referenced using the Portfolio Visualizer link below. Past performance is not indicative of future performance...
@larryB, VPMAX is aggressive growth, or growth with some conviction. So, it may be frustrating at times, but if she can mix it with another LC-growth/blend, it would be fine LT.
Thanks for your comments. My concern for my daughter’s portfolio is that she literally pays no attention to it. That’s great for ignoring short term underperformance and market gyrations. But if Mr. Fried and his team fade away and are replaced by lesser lights she would never notice. As long as I am watching , that risk is covered. But I am,,, as one of my buddies likes to say,,, rounding third. Thus the index solution.
@larryB, VPMAX is aggressive growth, or growth with some conviction. So, it may be frustrating at times, but if she can mix it with another LC-growth/blend, it would be fine LT.
@yogibearbull, would it make any sense to mix it with VPCCX, a LC blend fund, or are both too similar?
@larryB, VPMAX is aggressive growth, or growth with some conviction. So, it may be frustrating at times, but if she can mix it with another LC-growth/blend, it would be fine LT.
"aggressive growth, or growth with some conviction."
I interpret that as "we feel/hope REALLYREALLYREALLY STRONGLY that this position will do well. To that end, we are lighting candles, clicking our heels, and buring incense around the Bloomberg Terminal to further show our support for these companies over the next rolling 3-5 year period."
Can someone translate that into English or did I get it right?
@rforno. As good an explanation of active management as I have found. Do you have an explanation of technical analysis?
"We really think that this squiggle matches what that squiggle did over there last [time period] which suggests this next squiggle coming up will act in [declared way]. And if not we'll wait until it can be compared to the previous squiggle over here but this time will be different because it's viewed at a 45-degree angle whilst humming the 'Whipsaw Song' and doing the Macarena in front of a TV playing CNBC in-between shots of gin."
Speaking as someone who's dabbled in the dark arts of TA, it's AKA: a state of voodoo brought about by hopium ingestion..
Possibly I answered my question. VPMCX and VPCCX seem quite similar including both share 6 companies in their top 10 largest holdings (although in a different order).
Comments
Why has BB gone nowhere but down...
Tumble after tumble:
blackberry-stock-tumbling
Thanks for posting!
I completed a Vanguard survey earlier today and the firm apparently is considering reopening
the Primecap and Capital Opportunity funds:
"Vanguard is considering reopening a fund that has been closed or limited to certain investors for the last decade. Here is information about this fund: Vanguard Capital Opportunity Fund – Capital Opportunity is an active, aggressive growth fund that invests in companies of all sizes across market cap (large, mid, & small) primarily in the US. The PRIMECAP manager expects that these companies will grow over time but may be volatile in the short-term."
I own VPMAX and VPCCX but don't own VHCAX.
Someone who owns only VHCAX reported that reopening VPMAX was mentioned in his Vanguard survey.
The following survey question really piqued my interest:
"Does the Vanguard PRIMECAP investment limit of $25,000 per year impact your investment decisions?"
Well, yes it does.
I'd exchange my entire VPCCX investment for VPMAX if Vanguard allowed it.
Actively managed funds may underperform the broader market
for several consecutive years and returns could be "lumpy."
For example, VPMAX lagged the S&P 500 and Russell 1000 indexes in 2019, 2020, and 2021.
An investor incapable of tolerating subpar short-term performance could sell at an inopportune time.
This individual would probably be better off investing in low-cost broad-based index funds.
Having said that, I really like the Primecap management team and VPMAX in particular.
A 30-year analysis (Jan. 1994 - Dec. 2023) of Vanguard PRIMECAP, Vanguard Total Stock Market Index,
and Vanguard 500 Index can be referenced using the Portfolio Visualizer link below.
Past performance is not indicative of future performance...
https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=BCPJliOkim1OuHmlYERP6
I interpret that as "we feel/hope REALLYREALLYREALLY STRONGLY that this position will do well. To that end, we are lighting candles, clicking our heels, and buring incense around the Bloomberg Terminal to further show our support for these companies over the next rolling 3-5 year period."
Can someone translate that into English or did I get it right?
Speaking as someone who's dabbled in the dark arts of TA, it's AKA: a state of voodoo brought about by hopium ingestion..
https://investor.vanguard.com/tools-calculators/etf-fund-comparison-tool?Ticker=vpmcx,vpccx