Finding a mutual fund with good performance these days is like trying to find a drink in the Sahara Desert -- you just don't have that many options. But in a city famous for beer, Milwaukee-based FMI Common Stock Fund (FMIMX) stands out as a consistent performer. The fund has brewed up quite a record and beaten its benchmark, the Russell 2000, by a solid 2% in the nearly three decades since its inception.
And even though the fund was down in 2008, its decline was significantly less than the market average. With solid performance and consistent management over several decades, this no-load fund might be a worthy addition to many an investor’s portfolio.
- Inception date: Dec. 18, 1981
- Expense ratio: 1.23%
- Net assets: $429 million
- Investment minimum: $1,000
Selecting good businesses at value prices is the mantra that has helped the FMI Stock fund to an outstanding average annual return of more than 11% since its inception 27 years ago. Top holdings include a range of stocks, from recession-resistant companies like PetSmart (Nasdaq: PETM ) to stocks in the much-maligned financial sector, such as Affiliated Managers (NYSE: AMG ) and Old Republic (NYSE: ORI ) .
I like the steady hand of two co-managers who have been with the fund for the long haul and have the ability to guide the fund through these uncertain times. Ted Kellner has been with the fund since its inception, and Patrick English joined the fund in 1997. Financial stocks account for the fund's largest sector allocation at 13%, and, for me, the potential of carefully selected financials adds to the allure of the fund.
With just 45 stocks in its portfolio, the FMI Stock Fund isn't looking for diversification to protect its returns. However, managers have added value in making careful selections. Long-term holdings in Family Dollar (NYSE: FDO ) and Watson Wyatt (NYSE: WW ) have paid off well for the fund.
However, management is not adverse to trading stocks, as turnover has not fallen below 34% in recent years. That keeps the fund from being as tax-efficient as it could be. Despite these concerns, the fund’s managers have a proven track record of market-beating performance in the small- and mid-cap arena, and that makes me very comfortable adding this fund to my short list of potential investments.