It is always interesting to find money managers that perform well during market corrections. I suggest starting a file for such managers with the idea of researching an allocation of at least some of your portfolio to the funds they manage. Barron’s featured an article written by Paul Lin about 3 mutual fund managers that seriously outperformed the stock market last year. Unfortunately seriously outperforming meant a small gain or not loosing much. Nevertheless not loosing much is a good thing in a market that went down in the neighborhood of 40%.
As quoted in the article Warren Buffett said “It’s when the tide goes out that you find out who’s swimming without a bathing suit. I have mine on.” Well these 3 managers had theirs on also according to performance numbers in the article and here is how they outperformed.
Forester Value Fund (FVALX) managed by Tom Forester raised as much as 30% cash in his fund and avoided big commercial and investment banks and life insurers. The fund managed to eek out a .39% gain for the year.
PMFM Managed Portfolio Trust (ETFFX) run by Greg Morris incurred a loss of 5.77% last year. Greg used his own technical model and was in 100% cash for much of the year. A technical model is a system for purchase and sell decisions based on indicators derived from past price moves and usually involves the use of stock charts.
Gabelli ABC Fund (GABCX) run by the infamous Mario Gabelli lost only 2.63% partially by playing the Budweiser-Busch purchase by InBev profitably. Gabelli said that he has had 15 up years and this is the first down year according to Barron’s.
The key to investing wisely is diversification. Having a portion of assets with a manager that does well during market downturns can be difficult if and when they underperform during the big moves upward as often happens. Now it sure appears as if a discipline of hanging on would have been a smart thing to do.
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