Focused funds aim to boost gains by not diluting strong picks with a lot of also-rans. That’s what Marsico 21st Century Fund (MXXIX) is doing. The $92 million portfolio is part of Marsico Funds, which specializes in concentrated portfolios.
The fund, with 34 holdings, was up 33.18% this year going into Tuesday. That topped the S&P 500 by 17.43 percentage points and was 14.21 points ahead of its large-cap growth peers.
Open since Feb. 1, 2000, the fund lost an average annual 8.03% the past three years vs. losses of 11.27% for the S&P 500 and 19.04% for its category.
Manager Corydon Gilchrist, who took the reins from Jim Hillary on Feb. 1, says smaller stocks served the fund best through the market and economic downturns. But he’s been buying a lot of large caps lately. Beaten down in the bear market, many such firms were forced to cut costs. That now makes them attractive. “Ballpark, normally about 33% of our assets are in each cap size,” Gilchrist said. “Then we go for the best opportunities for value and growth wherever they are.” So the fund has 50% of its money in large caps. It has 35% in mid caps and 15% in small caps.
The fund aims for three types of stocks. Gilchrist calls the first group life-cycle-change stocks. These are much-undervalued firms that are expected to benefit from a catalyst. He looks for them to turn around within a couple of months. Marvel Enterprises (MVL) is an example. It’s up 144% this year, but the fund sold its stake at 22 late in the second quarter due to valuation issues. The fund’s cost was 11 to 12.
The second group is aggressive growers. These are firms poised for big market-share gains. Core growth firms, the third group, already are market leaders, and their earnings increases are expected to beat the market’s. The fund limits how focused it gets. It doesn’t put more than 9% of assets into any one position. The average weighting is 3%. “And we make sure we’re in eight to 10 sectors at all times,” Gilchrist said.
Sporting goods retailer Gart Sports (TSA) merged with Sports Authority (TSA) on Aug. 4 and took its new spouse’s name. The fund began buying at 19. Its stake gained 49% in the quarter. Sports Authority trades around 32. Select Comfort (SCSS) is in the fund’s aggressive growth camp. Shares are up 148% this year.
UCBH Holdings (UCBH) is up 51% this year. The bank caters to ethnic Chinese customers, Gilchrist says. From San Francisco, it has expanded into Los Angeles and New York.