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M*: An Outstanding Large-Cap Fund For Patient Investors: (DODGX)
The fund used to be a good performer. M* failed to pointed out the severe drawdown during 2007-2008 and it took longer than the index to recover. Among large cap value funds there are better options.
\\\ have come with elevated volatility and downside capture levels. This was evident during the financial crisis of 2007-09, and the fund also lagged in a volatile 2011. But the fund has bounced back: During the trailing five-year period ended June 2017, the fund’s 16.4% annualized gain outpaced the Russell 1000 Value’s 13.9% gain as well as 99% of its large-value peers.
@MFO Members: In the Linkster's opinion, one of the "Four Horseman" of fund companies along with Vanguard, Fidelity, and T. Rowe Price. I highly recommend their funds. Regards, Ted https://www.dodgeandcox.com/
I am trying to understand how a fund can be considered outstanding when for the last 10 years it could not keep pace with the S&P, for the last 15 years was ahead of the index by only 0.46%, with volatility higher then the benchmark - for most of the period. If this is considered 'enviable long-term results", then indexing is indeed attractive.
I am trying to understand how a fund can be considered outstanding when for the last 10 years it could not keep pace with the S&P, for the last 15 years was ahead of the index by only 0.46%, with volatility higher than the benchmark - for most of the period. If this is considered 'enviable long-term results", then indexing is indeed attractive.
This large cap value fund outpaced the S&P 500 Value Index over the last 10 years (5.78% annualized vs. 5.01%) as well as over the past fifteen years (9.56% vs. 8.51%), 5 years (16.72% vs. 14.01%), 3 years (8.83% vs. 7.98%) and 1 year (25.45% vs. 13.37%). All data as of 7/17/17, per M*.
If you don't want a value fund, that's fine. Invest in a blend or growth fund. But if you are looking for a large cap value fund, what do you feel is a better one than DODGX?
If one finds indexing attractive, one might consider VSPVX ( your index company of preference appears to be Standard and Poors)? Or perhaps VRVIX (M* seems to like comparing DODGX against the Russell 1000 Value index). Note that these both have had returns falling short of DODGX. (FWIW, DODGX has better 5 year performance than any 5* LCV fund as rated by M*, so its performance does come at the expense of some extra risk - hence its lower 4* rating).
Lipper rates DODGX a 5 as a large cap value fund for consistent return and for total return. The fund drops to 4 on consistent return, which, like the M* rating, suggests that the fund is not the very best LCV fund around for short term investing.
@davidmoran, For sure we have different point of view and personal experience. I used to invested with D&C for many years, most notably the Stock and International funds. The team approach in my opinion failed in risk management and time it took to full recover was longer than their peers. In addition, the management never owed up to mistakes made either in interviews or shareholder reports.
"In addition, the management never owed up to mistakes made either in interviews or shareholder reports."
About its 2008 performance, D&C president "Olivier says, 'it's hard to defend our investments in the banks. We misjudged the situation.'" Kiplinger, What Went Wrong at Dodge and Cox, Jan 31, 2009.
Admittedly D&C does a lot of hemming and hawing, but it doesn't deny making mistakes (it just often blames them on unforeseen circumstances). I do recall D&C taking making some changes to contain risk after the 2008 debacle (maybe limiting industry concentration?), but that may be the rare exception that proves the rule.
@msf: Thank you for posting. IMHO I think D&C are an intellectually honest group. They revamped their process following the poor performances in 2009. Are they lights-out; infallible? No. In my book they seem to be a reasonable option in many respects; albeit larger in AUM and greater volatility than one would like.
Again, about keeping DODGX and M* accountable for a clear standard. The webpage of D&C states (as of June 30), 10 year returns 5.89% - compared with S&P 7.18%. Let's please not search for excuses for underperformance. Without discussing the yearly tax cost of 0.98%.
In relation to the fund performance during the past 5-years, more volatile funds that missed in the downside in 2007-2008, typically have better returns in the more recent period. For this reason I tend not to rely on 5-year returns.
What is different about DODGX (in relation to other outstanding funds!) is that its returns, after the 07-08 underperformance, were not adequate for the fund to catch up with the S&P.
"Huh? Gosh, the three ]LCV funds] I moved to long ago from DODGX (before placing everything LCV in DSEEX): PRBLX. YACKX, and TWEIX."
What is long ago? DODGX was in the top quintile for 2009 and top fiftieth (second percentile) in 2011 and 2012. D&C funds often go through multi year funks and multi year spurts. 2008 is an important benchmark, as is 2015 for value funds. (By that latter metric, DSEEX looks good, at least so far.)
If one wants a smooth ride, shorter term, D&C funds are not the way to go. M* seemed to agree, saying that DODGX had enviable long term results. But (assuming that the long term market trend is upward) there is a problem with long term investors placing too much emphasis on the down years.
For example, one investor here five years ago almost to the day (Aug 2012) wrote about another D&C fund (DODBX):
"it certainly seems to have improved, but (recent, tempting) past performance does not etc. I cannot imagine why anyone would automatically prefer it now over Oakbx, Glrbx, and even AOR / AOM, my two 'new' favorite ETFs. "
(Data per M* as of 7/17/17) Growth of $10K: DODBX: $18,358.73 OAKBX: $15,848.45 AOR: $14,959.24 AOM: $13,422.89 GLRBX: $13,366.85
Now I'm not suggesting that one compare any of these funds with the S&P 500 (or S&P 1500); they're a different type of fund and the comparison wouldn't be meaningful. Likewise, I wouldn't go comparing value funds with blend (e.g. SPY) or growth funds, especially over the past decade when growth had a decided advantage. Heck, if I were to do that I'd just dump everything into a growth fund - even the average (median) LCG fund (NMFAX) returned 7.48% over the past decade, beating the S&P 500.
D&C, like many peers (and also unlike many other peers) completely blew 2008, getting caught in a value trap - continuing to hold on the way down. The questions are: how likely is another 2008, has D&C modified its investment process since then, is short term (e.g. 2015) or even prolonged underperformance acceptable in exchange for longer term gains? Different people have different answers.
Again, about keeping DODGX and M* accountable for a clear standard. The webpage of D&C states (as of June 30), 10 year returns 5.89% - compared with S&P 7.18%. Let's please not search for excuses for underperformance. Without discussing the yearly tax cost of 0.98%.
In relation to the fund performance during the past 5-years, more volatile funds that missed in the downside in 2007-2008, typically have better returns in the more recent period. For this reason I tend not to rely on 5-year returns.
What is different about DODGX (in relation to other outstanding funds!) is that its returns, after the 07-08 underperformance, were not adequate for the fund to catch up with the S&P.
+1
In order to get a full reading of this fund's performance, you have to look back 10 years, not 3 or 5. It's clear to see that they dropped the ball big time and never recovered to keep pace with the S&P 500 over the past 10 years. I held the fund during the disastrous 2007-2009 and dumped it upon a partial recovery. When I bought the fund, it was my understanding that they would hold up better on the downside; they did not. Quite the contrary. *M can talk about its "deep investment team" and "decisive value approach" all it wants. Currently, *M shows the fund's risk as very high. I guarantee it was showing as lower on *M when the credit crisis hit. Clearly, *M misread the fund as well. If you look at the fund's trailing SD, you will see it at 18.11 over 10 years, then it drops drastically to 11.41 at 5 years. You think something changed in their investment strategy during that time? Lessons learned.
Oh yeah, not a good call on my part 5y ago, it turned out. Ain't hindsight wonderful?
It did not occur to me likely that the Jameses in Ohio and McGregor at Oakmark would quite flatten, if not slump, as they did. I guess I would stand by my "automatically prefer" locution, though.
As for the AO_ approach, it also did not occur to me likely that diversification would fail to pay off as it did.
2013 is what did it for the D&C groupthink work, that and whatever the heck they bought / held last Nov 3. So good on them.
Still, as noted above, the 10y performance, if one is a believer in that period as some sort of standard, is problematic given their method constancy. As is that odd Aug 15 - Aug 16 slump.
"If you look at the fund's trailing SD, you will see it at 18.11 over 10 years, then it drops drastically to 11.41 at 5 years. You think something changed in their investment strategy during that time?"
Not based on that data alone. Since std dev is a second moment, outliers such as 2008 have a disproportionately large impact on the figures.
The S&P 500 std deviation also dropped by around 3/8, from 15.21 to 9.56. Do you think something changed in Standard and Poors' Index Committee's selection strategy during that time? (The S&P indexes, unlike those from other companies, are selected by individuals rather than by mechanical algorithms.)
Comments
\\\ have come with elevated volatility and downside capture levels. This was evident during the financial crisis of 2007-09, and the fund also lagged in a volatile 2011. But the fund has bounced back: During the trailing five-year period ended June 2017, the fund’s 16.4% annualized gain outpaced the Russell 1000 Value’s 13.9% gain as well as 99% of its large-value peers.
Regards,
Ted
https://www.dodgeandcox.com/
If this is considered 'enviable long-term results", then indexing is indeed attractive.
If you don't want a value fund, that's fine. Invest in a blend or growth fund. But if you are looking for a large cap value fund, what do you feel is a better one than DODGX?
If one finds indexing attractive, one might consider VSPVX ( your index company of preference appears to be Standard and Poors)? Or perhaps VRVIX (M* seems to like comparing DODGX against the Russell 1000 Value index). Note that these both have had returns falling short of DODGX. (FWIW, DODGX has better 5 year performance than any 5* LCV fund as rated by M*, so its performance does come at the expense of some extra risk - hence its lower 4* rating).
Lipper rates DODGX a 5 as a large cap value fund for consistent return and for total return. The fund drops to 4 on consistent return, which, like the M* rating, suggests that the fund is not the very best LCV fund around for short term investing.
About its 2008 performance, D&C president "Olivier says, 'it's hard to defend our investments in the banks. We misjudged the situation.'"
Kiplinger, What Went Wrong at Dodge and Cox, Jan 31, 2009.
Admittedly D&C does a lot of hemming and hawing, but it doesn't deny making mistakes (it just often blames them on unforeseen circumstances). I do recall D&C taking making some changes to contain risk after the 2008 debacle (maybe limiting industry concentration?), but that may be the rare exception that proves the rule.
>> if you are looking for a large cap value fund, what do you feel is a better one than DODGX?
Huh? Gosh, the three I moved to long ago from DODGX (before placing everything LCV in DSEEX): PRBLX. YACKX, and TWEIX.
D&C have roared back only chiefly since last November, with notable outperformance, by my read of their 10k-growth graph.
@sven
>> For sure we have different point of view and personal experience.
Not sure what this was in response to, or even that it's true, but I concur in your assessment of D&C.
Cheers.
D.S.
The webpage of D&C states (as of June 30), 10 year returns 5.89% - compared with S&P 7.18%. Let's please not search for excuses for underperformance. Without discussing the yearly tax cost of 0.98%.
In relation to the fund performance during the past 5-years, more volatile funds that missed in the downside in 2007-2008, typically have better returns in the more recent period. For this reason I tend not to rely on 5-year returns.
What is different about DODGX (in relation to other outstanding funds!) is that its returns, after the 07-08 underperformance, were not adequate for the fund to catch up with the S&P.
What is long ago? DODGX was in the top quintile for 2009 and top fiftieth (second percentile) in 2011 and 2012. D&C funds often go through multi year funks and multi year spurts. 2008 is an important benchmark, as is 2015 for value funds. (By that latter metric, DSEEX looks good, at least so far.)
If one wants a smooth ride, shorter term, D&C funds are not the way to go. M* seemed to agree, saying that DODGX had enviable long term results. But (assuming that the long term market trend is upward) there is a problem with long term investors placing too much emphasis on the down years.
For example, one investor here five years ago almost to the day (Aug 2012) wrote about another D&C fund (DODBX):
"it certainly seems to have improved, but (recent, tempting) past performance does not etc. I cannot imagine why anyone would automatically prefer it now over Oakbx, Glrbx, and even AOR / AOM, my two 'new' favorite ETFs. "
Here's the five year chart comparing these five funds.
(Data per M* as of 7/17/17) Growth of $10K:
DODBX: $18,358.73
OAKBX: $15,848.45
AOR: $14,959.24
AOM: $13,422.89
GLRBX: $13,366.85
Now I'm not suggesting that one compare any of these funds with the S&P 500 (or S&P 1500); they're a different type of fund and the comparison wouldn't be meaningful. Likewise, I wouldn't go comparing value funds with blend (e.g. SPY) or growth funds, especially over the past decade when growth had a decided advantage. Heck, if I were to do that I'd just dump everything into a growth fund - even the average (median) LCG fund (NMFAX) returned 7.48% over the past decade, beating the S&P 500.
D&C, like many peers (and also unlike many other peers) completely blew 2008, getting caught in a value trap - continuing to hold on the way down. The questions are: how likely is another 2008, has D&C modified its investment process since then, is short term (e.g. 2015) or even prolonged underperformance acceptable in exchange for longer term gains? Different people have different answers.
In order to get a full reading of this fund's performance, you have to look back 10 years, not 3 or 5. It's clear to see that they dropped the ball big time and never recovered to keep pace with the S&P 500 over the past 10 years. I held the fund during the disastrous 2007-2009 and dumped it upon a partial recovery. When I bought the fund, it was my understanding that they would hold up better on the downside; they did not. Quite the contrary. *M can talk about its "deep investment team" and "decisive value approach" all it wants. Currently, *M shows the fund's risk as very high. I guarantee it was showing as lower on *M when the credit crisis hit. Clearly, *M misread the fund as well. If you look at the fund's trailing SD, you will see it at 18.11 over 10 years, then it drops drastically to 11.41 at 5 years. You think something changed in their investment strategy during that time? Lessons learned.
It did not occur to me likely that the Jameses in Ohio and McGregor at Oakmark would quite flatten, if not slump, as they did. I guess I would stand by my "automatically prefer" locution, though.
As for the AO_ approach, it also did not occur to me likely that diversification would fail to pay off as it did.
2013 is what did it for the D&C groupthink work, that and whatever the heck they bought / held last Nov 3. So good on them.
Still, as noted above, the 10y performance, if one is a believer in that period as some sort of standard, is problematic given their method constancy. As is that odd Aug 15 - Aug 16 slump.
Not based on that data alone. Since std dev is a second moment, outliers such as 2008 have a disproportionately large impact on the figures.
The S&P 500 std deviation also dropped by around 3/8, from 15.21 to 9.56. Do you think something changed in Standard and Poors' Index Committee's selection strategy during that time? (The S&P indexes, unlike those from other companies, are selected by individuals rather than by mechanical algorithms.)