Tag Archives: big-dog-investments

FSRPX: Just How Good Are Amazon And Home Depot, Inc.

Summary High expense ratio, but good reference point for diversification. The fund has shown strong growth over the last decade. FSRPX is invested in the retail market. There are several industries that make up the consumer cyclical category. Retail is one of these industries and has seen some changes over the last decade. There’s more to come with new generations wanting convenience in their shopping experience. Malls are an example of retail that is becoming outdated and starting to have vacancy problems. Online retail has been one of the major factors in people not leaving their house to shop. It’s says a lot when you can go to a mall with over one hundred stores and still have to travel to another location to get your grocery shopping done. Retail starting to see some changes brings great potential to any companies who can adapt to the future. The Fidelity® Select Retailing Portfolio (MUTF: FSRPX ) has succeeded in choosing companies that have done will with the changing retail market. FSRPX mostly invests in companies that deal with merchandising finished goods and services primarily to individual customers. Expense Ratio The expense ratio is .81% which I would like to see lower much lower. If I wanted exposure to the retail market based on FSRPX’s performance I would only use it as a reference point for what stocks to invest in. The ratio is quite a bit lower than the category average, but that’s rarely ever a good comparison with how high some funds like to charge. With how well the fund has performed I believe the ratio wouldn’t deter me from investing if I wasn’t able to directly invest in the stocks. High ratios are always a major annoyance in a down market and why I tend to stay away from them. There was a management change in 2014. The fund continues to beat the S&P 500, but it’s hard to tell if that has anything to do with management or just how well Amazon (NASDAQ: AMZN ) has performed. Amazon is 15.7% of the fund’s holdings and has exploded this last year which could explain the continued performance of FSRPX. Diversification Here are the top ten holdings in the company: It’s daunting to see so much equity in not only the top ten holdings, but also 22.1% being in the top 2 companies out of 48. With 67.6% being in ten companies there is a lot of volatility risk. Management has done a good job in choosing stocks that have potential earnings growth compared to the benchmark: MSCI IMI Retailing 25/50. I was also excited to see that many of the holdings have good international potential. International exposure is always a great way for companies to grow when the domestic market is showing some stagnation. With how much equity this fund has in the top two holdings it’s a good idea to see how they are doing. Home Depot, Inc. (NYSE: HD ) has been performing extremely well and especially over the last several years beating the S&P by a large amount. HD is not only in a good retail market, but also has been a solid growing company. Analysts have been bullish on HD which could slow gains down, especially over a short period of time. I’m bullish on HD for a long term investment but wouldn’t expect a lot of growth over a short time horizon unless they exceed analysts’ current bullish forecasts. The housing market is looking steady for the time being, but keep in mind a hit to housing is a direct hit to HD. Amazon has been on a massive run lately and I like to think of it as a cube instead of a bubble. Their actions mimic the Star Trek’s Borg more than it does a bubble about to burst. While their PE ratio may scare many, it excites me that Amazon just floats around assimilating everything. Amazon has done a lot to help retail go in the right direction. Online retail is extremely convenient for customers. Amazon Prime is a great resource for people and those who have it are generally content. AWS, Amazon Web Services, is just another way Amazon has taken something clunky and made it into something flexible and easy to use. The cloud computing services offered by Amazon is not only inexpensive, but also has great scalability. There’s probably a plethora of hoops AMZN will have to jump through, but Amazon Prime Air is another great idea that will move shipping in the right directions for customers. Performance (click to enlarge) The fund has outperformed the S&P and its benchmark. There isn’t as much diversification which causes the potential for more volatility, but there is a track record for investing in companies that have done well over a long period of time. The two most notable years were the fund taking only a -29.58% hit in 2008, but still having the most growth in 2009 with 57.82%. Do note without these two years there isn’t much different than compared to the market. Retail as a whole has done better than the S&P 500 in 2015.

VCSAX: Consumer Staples Don’t Get Much Better Than This

Summary Low expense ratio with great long term returns. High yield for some volatility protection. Good sector diversification and strong holdings. Mutual funds are a good way to improve an investor’s risk adjusted return. Investing in consumer staples is not only a good way to diversify, but also helps with downside risk when the market takes a tumble. The fund I will be looking at is the Consumer Staples Index Fund Admiral Shares (MUTF: VCSAX ) which seeks to track the performance of the MSCI US Investable Market Consumer Staples 25/50 Index. This index has performed well over the last decade and comes with a decent dividend yield Yield This index has a distribution yield of 2.47%. If you’re looking for a high yield portfolio and seeking to invest in consumer staples, VCSAX is a great fit. Even without needing an income from your portfolio this has been a good investment showing an annual return of 10.39% over the past ten years. A lot of this can be attributed to consumer staples not taking the same hit the S&P took in 2008. Expense Ratio The expense ratio for VCSAX is .12% which is fine for being a passively managed mutual fund. I’m in favor of going the passively managed route for the consumer staples sector. With the Lipper peer average expense ratio being 1.51% it’s not worth the trouble of trying to beat an index. This is a top percentile performing index compared to competitors; When you don’t have to pay a high expense ratio – don’t! Diversification Index is well diversified and attempts to fully replicate its benchmark. The benchmark makes investments in the consumer staples market and should tend to be less sensitive to economic cycles. There is high correlation with the S&P and an investor should expect a lot of volatility if this is a large portion of their portfolio. Here are a list of the top ten holdings: There are 100 holdings and 56% of the weight is in the top ten. Even though this fund has performed very well, I would still like to see more diversification. I would make this a small portion of my portfolio for a more balanced return in the event of another big hit taken by the market. On the bright side, many of the companies in the top ten have been around for a while and shown they can shift strategies when needed. Procter & Gamble (NYSE: PG ) has been around since 1837 and has changed strategies many times. If there was ever a company to bet on surviving, this wouldn’t be a bad choice. PG has shown a long track record of a rising dividend which will help in a down market. The growth has been iffy lately but PG is making many changes and investing in the future. During an earnings calls management said they had many new products coming out. With the billions they are spending on R&D, if some of the proprietary technologies are successful there may be some serious company growth down the road. If I were to pick a single consumer staples company for my portfolio, Procter & Gamble is an easy choice for a long investment. Performance The following graphs show a major upside to consumer staples over the last decade: Over the past five years VCSAX and the S&P 500 have shown a strong correlation, as I would suspect. Looking at the ten year range there is a large difference. During a market crash a consumer staples index is going to take a punch but people are still going to make purchases. There will be some cutbacks, but nothing like there will be on the market as a whole. The other reason for the index to show lower losses is the high yield which will help protect returns during a down market. Conclusion When it comes to a consumer staples index VCSAX is as good as they come. The low expense ratio is really nice to see and helps with staying close in returns to the benchmark: In addition to having a good five year annual return of 14.54%, there has also been a great ten year return of 10.39%. With the crash in 2008, many investments reacted like the S&P 500 and it really diminished returns over the last decade. Consumer staples is a great way to reduce portfolio risk when it comes to the market taking a dive.

VUVLX: Enjoy Your Long Term Dividend

Summary VUVLX has a high dividend with broad sector exposure. Actively managed fund that has outperformed its benchmark over the last four years. Quantitatively driven investment approach which attempts to identify stocks below their true worth. The Vanguard U.S Value Fund (MUTF: VUVLX ) has shown some impressive improvement over the last several years compared to its benchmark: Russell 3000 Value Index. The fund is actively managed and in some years will be quite different from the Russell index. VUVLX had a slow start, but in the last five years has started to improve with new management and a higher turnover rate. This fund will primarily be invested in large companies, but the managers have no restrictions on what size companies they buy. The main focus of the fund’s advisors is to attempt to find stocks which are below their true worth and have strong growth potential EXPENSE RATIO The expense ratio for VUVLX is .29%. There’s no 12b-1 Distribution Fee and .26% of the expenses are management fees. Turnover rate from the last fiscal year was 66.10%. The management team saw some changes a few years ago including James D. Troyer joining the team. Troyer didn’t show up until 2012 according to Vanguard, but the fund starting improving in relationship with its benchmark in 2011: YIELD With a yield of 2.58% this stock becomes great for a long term holding. With a value fund I am looking for a long-term time horizon as an investor since it’s fully exposed to the stock market. A yield this high gives me a good opportunity to reinvest or to have a portfolio based around a yield for income. Diversification The following chart gives the top ten holdings of the fund: VUVLX has 247 holdings and 21.8% of the equity is in the top ten stocks. Great sector exposure being show here without having too much equity in the top holdings. The few holdings with over 2% equity, especially Exxon Mobil Corporation (NYSE: XOM ), have positioned themselves in the market strategically to flourish in an up market and survive comfortably if the market stagnates or hits a rough patch. Exxon has an impressive management team and a strong culture to succeed. While most of the competition is cutting jobs and decreasing amount spent on projects, Exxon is moving forward. If the price of crude oil begins to go up Exxon will be at a fantastic advantage. Even if the market for oil doesn’t rebound, the company is powerful and profitable: beating analysts’ third-quarter consensus report by $0.88 per share. If the market continues to fall XOM is a powerhouse with a high proven dividend and a large enough company to survive low oil prices. While I’m long XOM, there are still some risks to consider. Allegations and legal issues should be considered when looking at this stock. Here’s an article that gives good insight into potential problems. Legitimate or not, no one likes to get probed. Wells Fargo (NYSE: WFC ) is a great long term investment. CEO John Stumpf has publicly stated multiple times the importance of being disciplined; I believe disciplined sums up what makes this stock so strong. The strategy for loans has helped Wells Fargo for many years and makes them a fantastic long term and safe investment. There are some large banks which would benefit more if rate go up, but I don’t believe the risk is worth it. With such great arguments for rates not going up; I would much rather have my money invested in WFC. Even if rates do go up, Wells Fargo will still have a steady growth. Great diversification here even with financials being at 30.4%. Keep in mind the financial sector includes real estate, investment funds, banks, and insurance companies. With the demutualization of the insurance companies it is acceptable to have financials with so much equity. I was glad to see telecommunications and basic materials so low. Telecommunications does have the ability for some serious upside but the issue is knowing where it will come from. Everyone wants to sell you their new device. The competition is rising and causing the sector to buckle down and intelligently decide what to do next. We have seen some major flops even by the telecommunication giants and now would be a bad time to fall behind. There are plenty of good arguments for who will come out on top but I’m sure we’re all in for a few surprises. With companies working on snazzy new features and trying to be the first one to market breaking technology it is not a position I want to be heavily invested in. Conclusion VUVLX has progressively been increasing its performance, especially over the last five years: The new management team led by James D Troyer has been able to outperform the benchmark for the last five years. There are a couple risks to consider when investing in this mutual fund, even though I am bull a long term investment. Firstly, with only 0.5% foreign holdings, the fund is heavily invested in the domestic market. Secondly, there is a high turnover rate with the current management. Although there has been great performance recently, there’s extra risk when switching the fund around so much and only being invested in 247 stocks compared to the benchmark’s 1997. On a positive note, the holdings have a large percentage in companies that are safe buys which will perform over a long period of time. VUVLX is a mutual fund I would invest in if I were looking for a dividend portfolio.