Welcome, Fools, to part 45 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?
|
Torray (TORYX) |
|
|---|---|
|
Expense ratio |
1.10% |
|
Fund size |
$1.211 billion |
|
1-year return |
10.36% |
|
5-year return |
5.20% |
|
10-year return |
9.57% |
Top 5 holdings
|
Company |
% of Assets |
|---|---|
|
Fairfax
Financial |
5.8% |
|
Markel Corp. |
5.4% |
|
Cardinal Health |
4.7% |
|
Medtronic |
4.3% |
|
AMBAC Financial |
4.2% |
Meet Bob Torray and Doug Eby
The fightin' team at the Torray Fund is led by the guy with his name on the door, Bob Torray. He and longtime stock-picking partner, Doug Eby, have been sticking it to the stockinistas for 15 years.
As if Wall Street cares. Overcaffeinated short-termers discount Torray because it's been lost to the S&P 500 since 2002. Well, boo-freaking-hoo. Superstantial returns rarely come quickly, and for Torray, which has been investing funds professionally for 45 years, stock-picking is a game played best by the truly committed.
The Torray team's long-term record bears witness to this truism. Torray is up on the S&P 500 by an average of 1.5% annually since opening for business in 1990. Eat that, Wall Street.
How they invest
Call it the power of buy-and-hold at work. Or, better yet, call it smart. Here's how Eby described the pair's investing strategy in a recent interview with Motley Fool Champion Funds advisor Shannon Zimmerman:
There are essentially two ways to profit from investing in equities. One would be to time trades around news events and derive value from when we buy and sell. The other is to essentially be an owner in the business.... We are clearly centered on the latter and have a low-turnover, concentrated, high-quality portfolio that is attempting to buy upper-quartile businesses at average to below-average valuations.
"Low turnover" is probably the key phrase there. Morningstar says that Torray and Eby flip just 22% of the fund's portfolio annually. That's well below the hamster-wheel habit displayed by peers, who turn over 67% of their portfolios on average, according to Yahoo! Finance.
Better still, Torray and Eby are willing to stick with a handful of good ideas -- usually no more than 40 -- even when everyone else says they're crazy. Take newspapers. Torray was talking them up last year in an interview with Bloomberg. Quoting:
Newspaper companies have fantastic margins, among the best of any industry. If it's true that these businesses are in long-term decline, they're not going down as fast as the cash is coming in.
Surprise! The Torray Fund still holds sizable positions in Tribune
Is this fund for you?
Could Torray and Eby best Peter Lynch in a stock-picking contest? The returns say no.
But maybe that's an unfair comparison. Lynch was known to hold thousands of stocks as manager of Fidelity Magellan. Torray and Eby are content with two to three dozen really good ideas, and then holding them forever, a la Warren Buffett.
History says that's a good strategy, especially when you can get it on the cheap. Torray, for its part, charges just 1.10% annually -- within spitting distance of championship cheap.
But that's as close it gets. For Shannon, Torray still remains a fund to watch. Someday, though, I suspect it will become a fund to own. Stay tuned. (Or, if you're on the hunt for market-beating ideas right now, click here to get 30 days of free access to Champion Funds.)
See you back here next week, fund nation. Good night.
For more Foolish coverage of focused funds:
- Chuck Akre will bet big when he's got a winning idea.
- David Winters will speak his mind if it leads to big returns.
- You don't know what long-term investing is till you've met Richie Freeman.
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 38% vs. just 25% 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.
Fool contributor Tim Beyers, who is ranked 4,203 out of more than 29,500 in our Motley Fool CAPS investor intelligence database, is a regular viewer of The Colbert Report. (Stay the course.) Tim didn't own shares in any of the companies mentioned in this article at the time of publication. Tim's portfolio holdings can be found at his Fool profile. His thoughts on mutual funds, Foolishness, and investing in general may be found in his blog. The Motley Fool's disclosure policy is always championship-caliber.
