ALMOST two full months into the year, and it’s still impossible to say whether stocks or bonds are the better investment choice.
Such a time calls for a balanced fund, where the portfolio manager allocates assets between both stocks and bonds and adjusts the allocation whenever market conditions change.
One excellent balanced fund choice is the Oakmark Equity & Income I, which comes from the well-regarded and top-performing family of Oakmark funds.
But because Equity & Income I can rebalance its allocation between stocks and bonds, it is considered the Oakmark fund with an air bag.
“The fund currently has 58 percent in fixed-income securities, 37 percent in equities and 5 percent in cash,” said Clyde McGregor, portfolio manager of Oakmark Equity & Income I.
“The equity portion, composed of 40 stocks, is concentrated in the mid-cap sector. The bond allocation is 95 percent in T-bills and 5 percent in unrated securities.
“The myriad corporate downgrades have meant difficulty in finding value in the corporate-bond arena.”
So far this year, McGregor’s been upping his bond position (up from 44 percent at the end of last year) and cutting back on the stock position (down from 53 percent at the end of last year). He’s also been hoarding cash until he finds a good opportunity.
“To us, value means buying at 60 cents or less on the dollar,” McGregor said.
McGregor also said that he looks for companies where the managers own stock in the company, not just options, and where the company’s employees aren’t afraid to have a little fun and obviously love what they are doing.
The fund’s top stock holding, as of the end of last year, was Burlington Resources, an oil exploration company. Other top holdings include Safeco, Guidant, Synopsys, Ceridian, First Health Group, Watson Pharmaceuticals and Bristol-Myers Squibb.
McGregor is clearly doing something right. Over the past five years, the fund put up an average annual gain of 9.57 percent, outperforming the S&P 500 by 12.01 percent per year.
I am sad to report this is my last fund column for The Post.
I am taking a job with a Standard & Poor’s investment newsletter, The Outlook.
But after seven years of my guidance, I’m sure you know how to find fantastic funds by now: never pay a load, make sure the fund is charging lower-than-average expenses and never chase short-term performance since long-term performance is a much better indicator of likely future returns.
Good luck and good-bye.
Fund at a glance
Name Oakmark Equity & Income I
Portfolio manager Clyde McGregor
Average annual gain (5 years) 9.57
Fees
Load: None
Expense: 0.98%
Top holdings
U.S. Treasuries
Burlington Resources
Safeco
Guidant
Minimum initial investment $1,000
Phone 800-625-6275
Web site http://www.oakmark.com