Tuesday January 31, 2012
by Walter Frank, editor MoneyLetterFunds that invest in a relatively few stocks or sectors are less diversified than broadly invested funds and their volatility can be much higher. But the team at
FBR Focus (
FBRVX) seems to be getting it right.
Since 2001, the fund has outperformed at least 90% of its peers in six calendar years. It's long term performance compared to its peers is even more impressive.
A trailing ten-year average return of 12.1% and 15-year return of 13% both outpace 99% of its peer group. Looking at the trailing year, the fund's 7.5% return bests 97% of its peers.
The fund's managers use bottom-up investing techniques to find small and mid-cap firms with a number of characteristics including a strong business model demonstrating consistent earnings growth, better than average returns on equity and high levels of free cash flow.
The managers also look for stocks with an opportunity to reinvest excess profits back into the business, high quality management and a market valuation allowing purchase at a reasonable price.
Once a stock is selected for the portfolio, the manager expect to own it for a long period of time. Currently, the fund owns 22 stocks and has an average hold time of six years.
Over the last 12 months, the fund added six new positions including Google and World Fuel Services. It's top holding is 99 Cents Obnly Stores, which has a buyout pending.
The fund is also a long-term owner of O'Reilly Automotive, and expects to hold the stock for the next three to five years.
Learn more about this financial newsletter at Walter Frank's MoneyLetter.
