Who is Mark Salzinger?



How to Order
The No-Load
Fund Investor

How to Order
The Investor's
ETF Report

The No-Load Fund Investor The No-Load Fund Investor

Highlights of the Current Issue
of The No-Load Fund Investor

From The No-Load Fund Investor, 5/16...

Double-Digit Rebound

Most areas of the global equity market inched higher in April. Since early/mid-February, the stock market has been on an impressive advance. Even though the market gave a few percentage points back in the first few trading days of May, the S&P 500 is still up more than 12% since February 11, as I (Mark Salzinger) write this on May 4.

The best performers so far this year have been concentrated in the natural resources sector, especially energy and materials, including precious metals mining companies. Internationally, countries most associated with the export of commodities have rebounded, including various Latin American states, Russia and Canada.

The ‘value’ style of investing continues to beat ‘growth,’ mainly on a combination of good performance from energy stocks (more prevalent in value indexes and funds) and less in some huge technology and healthcare names more prevalent in growth indexes and funds. Small-cap stocks staged a modest rebound as compared with large caps in April, but are still trailing significantly over the past 12 months.

Best Buys Commentary. We are making no changes in Best Buys this month. Looking forward, we still expect an advantage for the growth style, thanks to the attractiveness of predictable earnings growth during a time of stagnant global economic growth. However, it finally appears as if some North American energy producers are cutting supply, which should support energy prices and add some stability to the prices of oil stocks. Therefore, we have only a modest preference for the growth style currently. We are least interested now in various ‘defensive’ investments that serve as yield substitutes for fixed income, including utilities and REITs.

Concentrated Funds

We consider multiple sources of risk when establishing asset allocations and selecting specific funds for our Best Buys models. Financial history proves that often a fund (or really any type of investment) that has performed well over many years has risk unrecognized by most investors that could bite them at any time. For example, after a decade or so of generally excellent investment performance until the financial crisis, funds with above-average exposure to banks and other financial companies crumbled in historic fashion, surprising virtually everybody. Of course, this type of thing has happened with high-flying individual stocks in a variety of industries for a multiple of heretofore unforeseen causes.

There have been many funds with long records of success and low risk, at least as measured by month-to-month volatility, that then plummet. In some cases, probably the manager just lost his or her touch. But in many others, the fund actually was risky despite the low volatility, perhaps through above-average (sometimes significantly so) sector weightings or even just hefty weightings in a handful of stocks.

The recent experience of Sequoia Fund (SEQUX) provides a particularly vivid illustration of this phenomenon. Long venerated as an excellent, low-risk equity fund, Sequoia’s managers built its position in Valeant Pharmaceuticals to an incredible 29% of assets as of June 2015, according to Morningstar. When Valeant was discovered last summer and fall to be unscrupulous, the stock tanked by as much as 70%. As a result, Sequoia dropped by more than 20% from September through March. To make matters even worse for investors in Sequoia, some of those redeeming their shares have received their proceeds partially in stock of fund holdings in lieu of cash.

Regardless of a fund’s past performance, we always consider its portfolio concentration before including it in Best Buys. If a fund devotes more than 10% of its assets to any one stock, we usually won’t consider it. It is even rare for us to include a fund that devotes more than 7%or so to its top holding (unless we are dealing with a sector fund). Otherwise, you risk significant underperformance if the top holding plummets.

Of course, weightings within a fund may increase as time passes, as managers add to positions or top holdings achieve above-average appreciation, driving the weighting higher. Therefore, we think it makes sense to examine the weightings of the top 10 holdings in each Best Buys equity fund from time to time. We did so in late April.

You can see details of our analysis of concentrated funds in the May issue of The No-Load Fund Investor.

Model Portfolios

Sample Model Portfolio from the Current Issue
of The No-Load Fund Investor

Wealth Builder Portfolio




% Weighting

Price QM Small Cap Gr Eq agg gr 1.03 10%
Price Blue Chip Growth growth 1.07 5%
RiverPark Large Growth growth 1.04 5%
Vangd Total Stock Market Idx growth 0.99 15%
Amer Century MidCap Val growth 0.85 10%
Artisan Global Sm CP int'l 1.23* 5%
Artisan Global Opps global 1.00 10%
Causeway Int'l Value int'l 0.93 5%
Vangd U.S. Value gr-inc 0.94 10%
Vangd Equity Income gr-inc 0.89 10%
Fidelity New Markets Inc. bond 0.41 5%
Vanguard Prime Money Market money mkt 0.00 10%
* = Estimated
N = New this month
H = Hold
W = increased portfolio weighting
D = Deletion this month
Average portfolio beta: 0.85
Average expense ratio: 0.74%
Since January 1, 1988, $10,000 has grown to $154,392

Best Buy Portfolios


Wealth Builder



Income & Preservation

Cash 10% 15% 20% 20%
Bonds 5% 15% 30% 60%
U.S. Equities 70% 60% 45% 15%
Int'l Equities 15% 10% 5% 5%
Portfolio returns since 1/1/88 through most recent month ($10,000 original investment) $154,392 $140,649 $105,939 $15,426
since 2/1/09
Average portfolio Beta 0.85 0.70 0.49 0.25
Average expense ratio 0.74 0.70 0.58 0.61

Back to top.

For questions regarding our services or a subscription,
call (800) 706-6364.
Ask for our World Wide Web Special Offer.
You also can  e-mail us at:

Copyright 2006 The No-Load Fund Investor. All rights reserved.

The No-Load Fund Investor
P.O. Box 3029, Brentwood, TN 37024