The Way Back Machine

Back on July 20th I posted about an interview with the manager of the Jensen Fund (JENSX) in Barron's. The sum and substance of my comments was that rigid screening can lead to missing big themes. As of the interview the fund had no energy or utilities exposure. I mentioned that the fund had lagged in 2003, 2004 and was lagging YTD as of the article. It is still lagging YTD. Eyeballing a chart shows the SPX up less than 1% and JENSX down 2.5% YTD.

Last night I had a commented posted anonymously, I responded, the commenter posted again and I replied again. Here is the exchange with anonymous in green and me in dark red.

Roger... JENSX has a disciplined investing strategy. Just because energy is hot now, they will not change their discipline. The reason they NEVER had any weighting in the fund in sectors like Energy and Utilities (and for that matter Financials except for MBNA (KRB)) is because these the first two sectors are capital intensive and do not consistently generate a ROE of atleast 15% (which is a requirement for any stock to be in the fund). Warren Buffett once said "Stock market is medium that delivers returns from the active to the patient" (or something to that effect). Finally, look closely at the fund's portfolio on Morningstar and you would see that almost all the fund's holdings are wide moat companies with long term advantages in their respective areas of market place. For ex. sysco (SYY), the food services giant. PEP, KO and BUD are few other examples. I think they beat Buffett to BUD recently.

energy and utilities are hot now? at any point in the market cycle there are groups that lead and groups that lag. figuring out what groups have a shot at leading and then overweighting them makes managing a portfolio much easier. if you get that wrong however but at least underweight the area you expect to lag you probably won't get hurt. no energy and no utilities is not diversified. I prefer a diversified portfolio.

Roger.... If you want to chase trends then this fund is not for you. Try ProFunds or Rydex funds or Fidelity Select funds. By prospectus and definition a concentrated fund like JENSX is NOT diversified. If you want a diversified fund (with average returns over the long term, I might add), try VFINX, FSMKX or VTSMX. Good Luck.

um, i guess you are not very familiar with this site. I am a huge believer in individual stocks, almost preachy in fact. Individual stock selection accounts for 90% of my practice.

As far as chasing trends? If you spend just a little time reading what I have written on this site over the last eleven months it will be clear that I am not late to too many parties.

The only way I can figure these anonymous posts from you, a month and half or two after the fact is you work for the fund.

According to BigCharts.com the fund goes back to late 1992. I looked year by year from 1993-2004 and year to date 2005. JENSX only beat the SPX thrice; 2000 2001 & 2002. There was a problem on the chart for the end of 1997 so I can't be sure either way about that year.

Your comment mentions something about average returns. JENSX has been below THE average 76% of the time, assuming Big Charts is correct about the inception date.

Further since inception JENSX is up what looks on the chart to be 140%. In the same time frame SPX looks to be up a hair over 180%.

This has been a great exchange. I am going to post the whole thing with charts tomorrow. thank you.

And here is the chart. Since the first article Morningstar has reduced it from 5 stars to 4 stars. I did not know, before this person posted his comments last night, to what extent this fund appears to have lagged the market. To be clear I looked at one year at a time starting with January 2, 1993.

I have to believe there are mutual funds with just as strict criteria as JENSX that have done better than the market. One of those might have been a better example to defend the technique.

The whole point of this is to, as I say all the time, take a little from me and a little from other places and come up with your own process. Long time readers know that I find simple to be better and easier. That was the point on July 20th and it is the point today.

As a side note there is no spell check in the comment feature and I did not correct any typos from the comments for this post.