Calls for U. S. investors to invest overseas get louder each day. While overseas investments can help investors diversify their mutual fund portfolios, domestic investments need not be overlooked.
Selected domestic mutual funds have achieved stellar returns since the market bottomed in March. One such fund is the no-load Yacktman Fund (YACKX) managed by the father and son team of Donald Yacktman and Stephen Yacktman.
Since March 9, the Yacktman Fund has outperformed both domestic and international equity performance benchmarks by investing most of its assets right here in the U. S. The Yacktman fund has gained over 88% outpacing both the S&P 500’s 51% gain and the MSCI EAFE Index’s 59% gain. This mutual fund has also performed better than investments in the popular BRIC countries of Brazil, Russia, India, and China, beating MSCI BRIC Index’s 80% gain.
The Yacktman Fund has achieved this success by loading up on consumer discretionary stocks like Liberty Media Interactive (LINTA) and Viacom (VIA) in the media group and finance companies like AmeriCredit (ACF) during the credit crisis. The fund has also treaded lightly on laggards like telecommunication stocks.
Morningstar classifies the $738 million Yacktman Fund as large cap-value fund. The Yacktman Fund’s managers follow what they call a ‘flexible value investing’ strategy. They evaluate equity investments as if they are buying a long-term bond, adjusting their required rate of return based on the quality of the company: The higher the quality, the lower the required rate of return.
The Yacktman Fund typically has a concentrated portfolio. As of June 30, 2009, 50.5% of the fund’s assets were invested in the top ten holdings.
The Yacktman Fund is also not averse to holding cash for defensive purposes and opportunistic purchases. As of June 30, 2009, the fund held 13.5% of net assets in cash.
The recent success of the Yacktman Fund illustrates that investors can earn strong returns in the U. S. market as well. Tactical fund selection on the part of mutual fund investors can go a long way in undoing the damage from the bear market and rebuilding portfolios.