Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Better Know a Stock Picker

Welcome, Fools, to part 31 of our several-thousand-part series, "Better Know a Stock Picker," which is loosely, but not too loosely, based on Stephen Colbert's "Better Know a District" from The Colbert Report.

Like Stephen and his thorough investigations into America's congressional districts, each week I take a look at a fund you may want to own. What's on tap this week?

American Century Equity Income (TWEIX)

Expense ratio


Fund size

$4.64 billion

One-year return


Five-year return


10-year return


Source: American Century

Top 5 holdings


% of Assets

General Electric (NYSE: GE  )


ExxonMobil (NYSE: XOM  )


AT&T (NYSE: T  )


Bank of America (NYSE: BAC  )


H.J. Heinz (NYSE: HNZ  )


Source: American Century

Meet Phil Davidson
The fightin' team at American Century Equity Income is led by Phil Davidson and a team of co-managers who emphasize bargains in their stock picking. If that sounds conservative, it is. But that hasn't held back returns. Equity Income is up by more than 4% a year on the S&P 500 over the last decade.

Color me unsurprised. When Kiplinger's named Equity Income one of its 25 best funds to own in 2004, it pointed to the downside protection offered by Davidson's cheapskate approach. "The fund is not a leader in strong markets," columnist Steve Goldberg -- a particularly enjoyable chronicler of the fund industry -- wrote at the time.

Oh really? Value-driven Equity Income is up almost 20% year-to-date. That's more than 3.5% better than the S&P over the same period, reports Morningstar. Eat that, Wall Street.

How he invests
What gives this year? Dividends are probably helping. Equity Income yields an impressive 1.80% as of this writing. That compares favorably with the average S&P tracker, which yields just 1.61%.

Then there are the superstantial stocks in Davidson's portfolio. He recently told Fortune that top holding General Electric remains among his favorites, saying, "The probability of success with this investment is so high that I don't care if it goes sideways for another year." If so, he'll be in good company: GE's Foolish CEO Jeff Immelt has been a regular buyer of the shares.

Davidson will have less company in the murkier waters of convertible notes. He told Kiplinger's he likes them because they provide for above-average dividend yields, but with less risk than common stocks. Current favorites include notes from Hasbro (NYSE: HAS  ) and American International Group (NYSE: AIG  ) .

Is this fund for you?
Could Davidson be the next Peter Lynch? I'm tempted to say yes given his stellar long-term record. Usually, you have to be a growth-hugger like me to be swimming in the warm waters of 20% annualized returns.

Not Davidson. He's a firm follower of Warren Buffett's most famous rule: never lose money. That has to be comforting to investors in Equity Income. So, too, is its load-free 1.00% expense ratio. Why, then, has Motley Fool Champion Funds advisor Shannon Zimmerman failed to add it to the portfolio? Wish I knew.

But don't let that small-f fool you into thinking Shannon somehow overlooked Equity Income. Far from it. He's all too familiar with American Century funds, having chosen a solid market-beater from that shop not long ago. It remains one of the dozens of winners powering the portfolio to this day. (Want to see them all? Click here to get 30 days of free access to the service.)

And that's today's profile. See you back here next week, fund nation. Good night and Happy New Year.

For more Foolish coverage of investing cheapskates:

Think you can't beat the market with funds? Think again! The selections in Shannon Zimmerman's Motley Fool Champion Funds portfolio are up an average of 29% vs. just 19% for their comparable benchmarks. Ask us for an all-access pass to get an unfettered look at all of Shannon's picks, manager interviews, and model portfolios. Go ahead; it's free for 30 days and there's no obligation to buy.

Fool contributorTim Beyers, ranked 1,400 out of more than 18,600 inMotley Fool CAPS, is a regular viewer of The Colbert Report. (Stay the course.) Tim didn't own shares in any of the stocks or funds mentioned in this article at the time of publication. Get the skinny on all of the stocks in Tim's portfolio by checking his Foolprofile. Bank of America and H.J. Heinz areIncome Investor recommendations. Hasbro is aStock Advisor pick, while AT&T was a former selection of that newsletter. The Motley Fool'sdisclosure policyis always championship caliber.

Read/Post Comments (0) | Recommend This Article (20)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 519274, ~/Articles/ArticleHandler.aspx, 10/24/2016 6:02:21 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,223.03 77.32 0.43%
S&P 500 2,151.33 10.17 0.47%
NASD 5,309.83 52.43 1.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/24/2016 4:00 PM
AIG $60.32 Up +0.32 +0.53%
American Internati… CAPS Rating: ***
BAC $16.77 Up +0.10 +0.60%
Bank of America CAPS Rating: ****
GE $28.92 Down -0.06 -0.21%
General Electric CAPS Rating: ****
HAS $83.88 Up +1.07 +1.29%
Hasbro CAPS Rating: ****
HNZ.DL $72.49 Down +0.00 +0.00%
H.J. Heinz Company CAPS Rating: ****
T $36.86 Down -0.63 -1.68%
AT and T CAPS Rating: ****
XOM $86.91 Up +0.29 +0.33%
ExxonMobil CAPS Rating: ****