Winner's Circle of Stock-Fund Managers

A recent article in The Wall Street Journalreports that the publication’s quarterly survey of actively managed U.S.-stock funds shows that “boring can be beautiful. In fact, in the midst of volatile markets, being downright dull can prove the recipe for investment.”

The common denominator in the WSJ list of Winner’s Circle finalists, it says, is the “underweighting or ignoring” of the household name holdings (i.e. Apple, Google and Facebook) in favor of “lesser-known businesses able to demonstrate consistently robust gains in earnings and share prices.”

Here are the list’s top three finishers:

  1. Dennis Lynch, head of the Counterpoint Global team at Morgan Stanley Investment Management, which generated returns totaling 30.8% for the trailing 12 months ended June 30th. According to the article, Lynch says he is “reaping the fruits of a decision to de-emphasize both big tech companies and businesses that have exposure to the Chinese economy.”
  2. Stephen Grant, manager of Value Line Mid Cap Focused Fund, with a trailing 12-month gain of 26.9%. Grant argues, “It’s not what you make in bull markets, it’s what you keep” when markets get wonky.
  3. Joe Hudepohl, manager of the Eaton Vance Atlanta Capital Focused Growth Fund, which posted a gain of 26.7% and says he targets companies that demonstrate a 10-year operating history as a public company as well as smooth and steady earnings growth. “We participate in up markets,” he says, “and we protect capital when things are more difficult.”

The article concludes, “For these top-performing managers, it’s all about control.” They admit that while they can’t predict big trends, they can focus on more quantifiable factors like earnings and individual business trends. Hudepohl explains, “Our goal is outperformance over a full market cycle, not just the short term. The short term isn’t what we’re about.”