Jensen
Funds & Featured Portfolios, by Mark Robertson, Managing Partner June 1st, 2009
JENSX reads like a Who’s Who of blue chip high-quality stocks that are frequently of interest to our community of long-term investors..
The challenges facing retirement plan investors don’t appear to be getting any easier. Discovering a reliable mutual fund and achieving superior returns continues to be elusive. Starting with the January 2009 issue of Expected Returns, we converted this fund feature to another “nest egg” demonstration, maintained as a model portfolio and managed using MANIFEST tools and resources.
The Methodology and Focus
The MANIFEST methodology is unique because of its forward-looking emphasis. The projected returns for the individual holdings of funds are analyzed and used to compile a projected return for a universe of funds. In that spirit, our emphasis in the study of funds is not on where the fund has been (trailing returns), but where it seems to be going.
Results (May 31, 2009). The fund selections for the Hoard have managed a total return of 22.7% vs. 4.0% for the total stock market since inception — for a relative return of 18.7%.
This month’s selection, Jensen (JENSX) provides a high-quality safe harbor that should navigate market turbulence fairly well and capture the benefits of some recovery among larger companies.
Results
The relative return since inception currently stands at +18.7%. The total return for the Hoard is 22.7% during a period when the total return for the total stock market is +4.0%.
All four of the fund selections have outperformed the stock market benchmark (VTSMX) while held for an accuracy rating of 100%.
Current holdings Oberweis Emerging Growth (OBEGX), Vanguard Technology (VGT), and iShares Healthcare Providers (IHF) have delivered strong performance over the last few months.
We think it’s probably time to de-emphasize the Russell 2000 (smaller companies) — not ignore, merely reduce the relative emphasis — and focus a little more on the larger companies while building a stronger quality rating for the portfolio.
June 2009 Fund Manifest. Top funds ranked by the same combination rating (PAR & Quality) as the Tin Cup model portfolio. Jensen (JENSX) is the selection for our model portfolio for June 2009.
Last month, we added the total stock market ETF (VTI) to the Hoard dashboard so we can easily monitor for PARs dropping below the VTI PAR. As shown here, VGT is very close to the benchmark and the combination rating (see the fund screening results) has also dropped below the benchmark. Hence, we’ll sell if it drops much further on advancing prices. We don’t want to get into whipsawing, so we’ll give it some breathing room — or deadband.
Screening
The leading candidates are shown in the accompanying screening results (sorted by combination rating, descending).
We’ve witnessed a general scarcity of well-positioned funds since the inception of MANIFEST and this month is no exception. Again!
In fact, there are no qualifying funds with a PAR +3.0 percentage points greater than VTI. In fact, there are only (7) funds on the screening results with PARs greater than the Hoard overall average PAR of 14.2%. This makes it quite challenging to bolster the overall averages by adding high-potential candidates to the model portfolio.
Jensen Holdings (June 2, 2009). Jensen has long-ranked as the highest quality rated fund with so many holdings held in high regard by our community of investors. How many of these do you own? How many are in your pounce pile?
Decisions
In the absence of a PAR front runner, we’d decided add Jensen (JENSX) to the collection on the basis of its highest combination rating.
Jensen reads like a Who’s Who of blue chip high-quality stocks that are frequently of interest to our community of long-term investors.
From the largest holding, Microsoft (MSFT) all the way down the list, Jensen is a bonanza for shopping for blue chip potential. Although Jensen has a slightly lower PAR on entry into the Hoard portfolio — we’ll be slow to unload this one, leaning heavily on the combination rating to do so. In a nutshell, if Jensen continues to collect the highest-quality stocks, it’ll take a mid-single digit PAR (or close to it) to provide the justification for removal.
In recent remarks to his newsletter readers, momentum and growth stockpicker Louis Navellier points out that a weaker dollar makes the large multi-national companies more attractive these days. The rally since March 9 has been largely concentrated in smaller, low-quality, companies and Navellier points out that the combination of currency “tailwinds” and strong performance by the blue chippers is amplified when earnings trends begin to reshape. In the end, EPS trends still matter and many of the larger company or defensive funds have definitely bubbled to the top of our screen in recent months.
As we said, well-positioned actively managed funds are pretty elusive, so we’ll probably not “hurry.”
Hoard Dashboard (June 1, 2009). Our combination of Vanguard Technology (VGT), Oberweis Emerging Growth (OBEGX) and the iShares Healthcare Providers (IHF) have soared during the first five months of 2009. The technology sector fund (VGT) is now “below the line” and we’ll be vigilant about selling if the opportunity presents itself.
Mark Robertson
Mark Robertson is founder and managing partner of Manifest Investing, a source for research and portfolio management focusing on strategic long term investors.