One of the oldest existing mutual funds has shown that it's not headed for the grave anytime soon. In fact, with a 38.5% return in 2007, this golden oldie has plenty of spunk left.
The CGM Mutual Fund (FUND: LOMMX) was market-tested a few months after its inception by the Crash of 1929. Yet while its performance last year was spectacular, it wasn't a fluke. Investors looking for a balanced fund with a solid long-term record should take a hard look at CGM.
Fund facts:
- Inception date: Nov. 6, 1929.
- Expense ratio: 1.05%.
- Net assets: $598 million.
- Investment minimum: $2,500
Fund history
Formerly known as the Loomis Sayles Mutual Fund, CGM Mutual normally splits its assets 75%/25% between stocks and bonds. The fund may invest in companies of any size, but primarily invests in companies with market capitalizations above $500 million.
Ken Heebner has been the fund's manager for more than 25 years. His leadership has helped the fund earn strong returns, with a five-year average return of 21% annually and a 10-year average of 7.5% -- both well in excess of the S&P 500.
Portfolio
CGM Mutual doesn't pull any punches with its investments. The Fund can be very concentrated and may invest up to 25% of its assets in securities issued by companies in any single industry. As of the fund's last report at the end of 2007, it held just 16 stocks, making the fund much less diversified than most.
Yet even though it doesn't buy many stocks, the fund makes some savvy bets. Recently, its top three stock holdings were in energy and machinery companies: Petrobras (NYSE: PBR), CNH Global (NYSE: CNH), and Schlumberger (NYSE: SLB). For its fixed-income allocation, the fund is currently holding close to 28% of its assets in cash via Treasury bills.
Portfolio fit?
With a balanced fund, you'll typically see middle-of-the-road performance as these funds seek investments that achieve both moderate income and capital gains. CGM Mutual is different, though, as it takes such concentrated positions.
That makes the fund both potentially a higher performer and higher risk. CGM also has a high portfolio turnover -- more than 400% in each of the past two years -- so this fund is most likely not suitable for a taxable account, due to the tax consequences of these transactions.
If what you're looking for from an almost 80-year-old fund is peace and quiet, CGM Mutual isn't your pick. But if you want a fund that acts half its age, you'll want to take a closer look.
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