It's tough not to have confidence in
FMI Large Cap
). Lead manager Pat English and his team look for strong and
durable businesses trading at reasonable valuations. With that
comes a contrarian mindset. They look to buy stocks whose prices
are suffering and sell into strength.
The managers run a concentrated portfolio of 29 stocks, keeping a
watch list of attractive companies they can buy when their prices
dip. They're also patient investors, targeting a holding period of
one to five years. A few of the fund's holdings have been in the
portfolio for close to a decade.
The fund's concentrated nature means it courts more issuer-specific
risk than does its average large-blend peer. One of the fund's
bigger single-name bets in recent years, though, has been one of
)-4% of the
(INDEXSP:.INX) and nearly 5% of the average large-blend
fund-weighed on 2012's relative performance, given its 33% gain
last year. The managers tend to shy away from technology companies
because of cutthroat competition and short product cycles, so Apple
has never appealed to them.
So far this year, as Apple's stock price has slid more than 16%,
its absence from the portfolio has been a contributor to the fund's
top-quartile 11.4% year-to-date gain through March 31.
Still, some of the fund's longtime holdings, including top ten
), 3.8% of assets as of December 31), don't appear as attractively
valued to the team today. However, in the absence of more
attractive opportunities, the managers argue it's a well-run,
financially strong company that should continue to hold up well in
a low-growth environment.
Over time, the team's patient and disciplined process has been
rewarded. Its 8.0% annualized gain since its December 2001
inception through March 31 outpaces the S&P 500 and large-blend
category average by an annualized 3.2 and 3.9 percentage points,
respectively, with less volatility.
It's been consistent, too, landing in the top quartile in more than
three-fourths of all rolling three-year periods since inception.
All told, investors are in good hands.
Editor's Note: The top three holdings in FMIHX (as of March 31)
(NYSE:BRK.B), 5.29%, and
Bank of New York Mellon
This article was written by Russel Kinnel of
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