Welcome, Fools, to part five of our several-thousand-part series, "Better Know a Fund Manager," 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?
|
Clipper Fund (CFIMX) | |
|---|---|
|
Expense ratio |
1.11% |
|
Fund size |
$3.49 billion in assets |
|
1-year return |
2.2% |
|
5-year return |
4.89% |
|
10-year return |
11.75% |
Meet Chris Davis and Ken Feinberg
The fightin' team at the Clipper Fund is led by Chris Davis, the grandson of famous investor Shelby C. Davis, who transformed $50,000 into $900 million over more than four decades of investing. That's quite a legacy to live up to.
Chris Davis has fared well thus far. Since 1995, he has been the advisor to Davis NY VentureA (FUND:NYVTX), which Morningstar says has beaten the S&P 500 by an average of 3.78% annually over the past five years. Solid. But don't go gushing about the Davis Dynasty; Chris owes considerable credit for the success of Davis NY to co-manager Ken Feinberg, who joined Davis Advisors in 1994. He and Davis have been partners since 1998.
And now both are poised to take over Clipper. For those who don't know, Clipper is somewhat like Fidelity Magellan (FUND:FAGMX) in that it has attained legendary status. A $10,000 investment at the inception of the fund, founded in 1984 by James Gipson, would have become $199,346 by the end of 2005. A $10,000 investment in the S&P over the same period, with dividends reinvested, would have returned roughly one-third less.
How they invest
Can Davis and Feinberg duplicate, or even exceed, that enviable track record? I've my doubts, if only because there's ample evidence that real returns from stocks could return to 7% or less for many years to come.
Nevertheless, the two aim to stick it to Wall Street's stockinistas. In his December letter to shareholders, on the eve of taking over the fund, Davis wrote that he and Feinberg have invested $50 million of their own money into Clipper. That's either crazy or impressive -- depending, of course, on your point of view.
So how will these outsiders win over the crybabies longing for Gipson's return? By staying the course, writes Davis. At the end of their tenure, Gipson and co-managers Michael Sandler and Bruce Veaco held just 23 stocks in the Clipper Fund. Similarly, Davis and Feinberg expect to hold between 15 and 35 stocks.
Is this fund for you?
Should you invest with Davis and Feinberg? Fellow Fool Stephen Simpson has already offered a wag of the finger. I won't go that far. But I'm not ready to tip my hat to the new Clipper captains, either -- even if there is plenty to like about their approach.
Take expenses, for example. Davis writes that Clipper investors can expect to see the fund's annual expense ratio drop to between 0.7% and 0.8% from 1.11% today. The pair has also gone to work on pruning the portfolio. New choices include Harley-Davidson (NYSE:HDI) and Costco (NASDAQ:COST). And Microsoft (NASDAQ:MSFT), which accounted for 2.4% of the portfolio in December, is now nowhere to be found. Considering the past five years of malaise, I suspect that most investors won't be missing Mr. Softy.
And that's this week's profile. See you back here next Thursday, fund nation. Good night.
Costco is aMotley Fool Stock Advisorselection. Microsoft is aMotley Fool Inside Valuerecommendation. Try out your favorite Foolish investing service -- includingChampion Funds, of course --free for 30 days.
Fool contributor Tim Beyers is a regular viewer of The Colbert Report. (Stay the course.) You can find out what's in Tim's portfolio by checking his Fool profile. The Motley Fool has an ironclad disclosure policy.
