Welcome, Fools, to part 44 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?
|
Bridgeway Aggressive Investors (BRAGX) | |
|---|---|
|
Expense ratio |
1.61% |
|
Fund size |
$369.4 mil |
|
1-year return |
0.90% |
|
5-year return |
12.80% |
|
10-year return |
19.90% |
Top 5 holdings
|
Company |
Percent of Assets |
|---|---|
|
Big Lots (NYSE:BIG) |
6.39% |
|
FEI Co. (NASDAQ:FEIC) |
4.53% |
|
AT&T (NYSE:T) |
4.14% |
|
Guess (NYSE:GES) |
3.42% |
|
NBTY (NYSE:NTY) |
3.11% |
Meet John Montgomery
The fightin' team at Bridgeway Aggressive Investors has been led by firm founder John Montgomery since the fund opened for business in the summer of 1994. He's produced 20.4% average annual returns in the 13 years since.
He's also a Fool. Indeed, like many of us who don the belled cap, Montgomery boasts an eclectic background. Consider his education. Montgomery earned undergraduate degrees in engineering and philosophy from Swarthmore College.
Furthermore, while he's clearly an unabashed capitalist, Montgomery is also uncommonly ethical. He closed Bridgeway Ultra Small Company to new investment at the end of 2001 on fears that investors were chasing unsustainable performance. (Ultra Small beat the index by more than 45 percentage points that year, Morningstar reports.)
And when the SEC accused Bridgeway of improperly calculating performance-based fees and thereby overcharging shareholders, Montgomery accepted sanctions and agreed to pay back $4.4 million plus interest. He also offered a very public apology. Quoting from his letter to shareholders:
As founder of Bridgeway Capital Management and President of Bridgeway Funds, this calculation was absolutely my responsibility, and I am the one at fault. Rule 205-2 is the definitive rule of law with respect to performance-based fees in a mutual fund structure, and Bridgeway was calculating them incorrectly.
If only Dick Strong had acted as ethically. Eat that, Wall Street.
How he invests
Of course, what really thrills Montgomery's investors is the ease with which he sticks it to the stockinistas.
How does he do it? Math. That is, he relies on computer models. Montgomery has been toying with them since his days as a research engineer at MIT.
But it wasn't until he was a student at Harvard Business School that Montgomery applied the science of modeling to portfolio management. He earned impressive results quickly and, from 1985 to 1991, applied the method to his own portfolio. Wealth followed -- so much so that, by 1993, he'd decided to create Bridgeway, which opened its doors in July of 1993 in Houston. Montgomery and his team still work there.
And they're still following the model in managing Bridgeway Aggressive Growth, which really is aggressive. According to the prospectus, Aggressive Growth will sometimes trade frequently, sell short, or enter into options positions. Whatever the strategy, if the model recommends it, Montgomery and his team do it.
Is this fund for you?
So, is Montgomery the next Peter Lynch? It's possible. Two Bridgeway funds -- Aggressive Growth and Ultra Small Company -- are among the market's 10 best of the last decade.
What's more, Montgomery eats his own cooking. Quoting from his 2004 interview with Motley Fool Champion Funds advisor Shannon Zimmerman:
My only outlets for investing in the stock market are the funds that we manage. And we encourage all of our partners -- what we call any full-time staff here -- to invest in the funds. And everybody is invested.
Really, there's only one problem with this fund: It's closed to new investors.
Disappointed? Fear not, Fool. Bridgeway offers 11 funds that may be worth your investing dollars, three of which are already part of Shannon's market-beating portfolio. For details, click here to get 30 days of free access to Champion Funds.
And that's today's profile. See you back here next week, fund nation. Good night.
For more Foolish coverage of the growth gurus:
- Stock picking 'zazz leads to titanic returns for Tom Marsico.
- Throw Fido a bone and check out Will Danoff's Fidelity Contrafund.
- Go for global growth with G. Paul Matthews.
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 39% vs. just 24% 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 subscribe.
Fool contributor Tim Beyers, who is ranked 7,060 out of more than 29,200 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.
