Friday January 11, 2013
by Walter Frank, editor MoneyLetter
Our top fund pick for aggressive investors is Oakmark Int'l (OAKIX); for conservative investors, we are sticking with our tried and true choice of other years: Loomis Sayles Bond Fund Retail (LSBDX).
Oakmark International is an unusual one for us. We try to avoid a fund that is already in investor’s eyes because of outstanding performance.
It is the next year’s performer we are looking for, not last year’s. However, we think Oakmark International has the potential to repeat this year.
Oakmark Int' is a very idiosyncratic fund. It goes its own way. Its success does not come from being the best among the crowd. Rather, success has come from following the Oakmark traditional value approach.
The approach digs deep issue by issue to estimate the ‘intrinsic value’ of any investment. Individual stock picking is the pride of Oakmark.
But there is something else that contributes to the success of this international fund: asset allocation. Fund manager David Herro extends his ‘intrinsic value’ approach to lead him to his allocation.
This led him to an allocation of 25% Japan and 55% Developed Europe. No emerging markets. What a nutty allocation for 2012, what a successful one. It is such thinking that makes us pick Herro’s Oakmark International as our top pick for 2013.
The managers Loomis Sayles Bond FUnd Retail have served us well, so why not stick with them? This last year the fund yielded 5.34% while providing a return of 14.6%.
This is a bond fund, and yield is what matters, but we won’t hold the performance against management. As you can imagine looking at performance, this is not your father’s bond fund.
The fund is very actively managed by the Loomis Sayles bond team under the guidance of the now-legendary Dan Fuss. It is basically a bond fund, but it will buy bonds not just for yield but also for the currency they carry, for example.
Right now the fund is invested 51.6% in corporate bonds and 18.2% in non-U.S. government bonds. We see next year as presenting a challenge to income-oriented funds. This is the fund to meet that challenge.”
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