Mutual Fund Monday 3/30/09

Another Monday has reared it's ugly head upon us. GM still couldn't get their house in order, so the Barack had to finally be the one to push Wagoner out. I understand some people's worry about socialism and government interference, but hey, don't run your company into the ground and it won't be an issue. Is Immelt being pushed out at GE? Is Mulally being pushed out at Ford? No, they're not, because they have their house in order. The lesson from all this? Be a responsible CEO. If we have to brush up against socialism for our Executive class to understand their responsibilities to all their stakeholders, then so be it. I don't endorse it, but something has to change.

So the title of the post is Mutual Fund Monday. I thought an easy way to do a post once a week would be to use the Yahoo Fund Screener to pop out some mutual funds that might be worth looking at. I am in the process of changing jobs, so I will more than likely be rolling over my current 401(k) to an IRA, so I'll have some decisions on how I want to divy up my current retirement stash.

I read an interesting article in Money (I think) a year ago or so that gave a real nice procedure for looking for Funds that don't suck. Of course, the main goal of picking Funds is finding some that are going to give you a chance of beating the SP500 index, which you can own in an index fund or ETF with no loads and very small expense ratios (<.25 or so). The procedure was using the screener to pick funds with no loads, 4 or 5 Morningstar Rating, low ratios, manager tenure of at least 5 years (with the longer the better), and a good performance rating (top 30% for example). Let's go to the first screen!


Category Any US Stock Fund
Rank in Category Top 30%
Tenure More than 5 years
Morningstar 4 Star Min
Min Investment less than $2500
Front Load None
Total Expense Less than 1%

Running that gives us 103 Funds. 100 is still a lot of Funds to pick from, but it's way better than 6 or 7 thousand! Let's sort on Manager Tenure and see who leads the pack. I'm always intrigued by the Manager Tenure, it's interesting for a Fund manager to be at one place for 20 years or so. So, building on that manager tenure, let's sort on longest tenure. The longest tenure is...73 years. 73 years! How does that work?

This week's fund is: ING Corporate Leaders Trust B (LEXCX)

So what's going on with a 73 year tenure? Looking up the profile on LEXCX, it says that it is a grantor trust that was formed in 1935. I looked around and found the prospectus at their site, and in 1935, they created the fund by buying an equal number of shares of 30 top American companies. Over the years, companies have failed, been bought, and merged, and now there are 23 companies. How great is that? The annual turnover: 0%. Category average: 68%. Having no turnover also saves a lot in expense ratios, .49% vs 1.28%. That's definitely staying ahead of the competition.

The alpha and beta of LEXCX is also an interesting study. The beta is .91, which means that the risk of LEXCX meeting the SP500 return is less than the SP500, giving it a nice risk rating. On top of that, the alpha is over 3, meaning that for the risk involved, you'll beat the SP500 return by 3 pts. Wow! For less risk, you should beat the SP500 by 3. Awesome.

I like long periods, so comparing 5 year performance (which includes a bunch of the last 6 months mess), LEXCX is down 1% vs 6.63% for the SP500. Beating the market by that much over that much time is a nice point. Sticking with long term strong companies is always a good way to invest long term.

So what are some problems? When you have only 23 companies, it's tough to not be too concentrated in a couple areas. LEXCX has a couple areas that could be worrisome, or good, depending how the next few decades pan out. Not surprisingly, having formed the fund in 1935, you've got some interesting holdings. From the prospectus, (granted, this is from Dec 07 and the percentages will be different), the two biggest sectors in LEXCX are oil (35%) and transportation (17%). The oil is as you would expect, with Exxon Mobil, Chevron, and Marathon. The transportation is two train companies, Burlington and UP. How many funds these days have 17% of their holdings in two train companies? Are trains sexy investments? Probably not. But if you think that rising oil prices are going to cause the railroads to continue to win freight back, you've got a hell of a play with the oil companies (oil prices causing the push to coal fired trains for delivering freight).

So, should you maybe have a cut of this in your IRA? You know, it looks fun to own. It's fun to talk about, and it's an interesting story. With a lot of oil, it could continue to perform well if the price of oil continues to go up. It has some other real nice blue chips like P&G, and GE. Would I put everything in there? Of course not. Is it maybe worth 20-25%? I think you could make a good case. I bet I end up with a little of this one in the end.

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