Message-ID: <29443999.1075858596725.JavaMail.evans@thyme> Date: Wed, 24 Oct 2001 20:06:50 -0700 (PDT) From: members@premierinvestornetwork.com To: members@premierinvestornetwork.com Subject: Twelve Safer Equity Fund Bets - October Investor's Edition Mime-Version: 1.0 Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: 7bit X-From: "PremierInvestorNetwork.com" @ENRON X-To: Premier Investor Network X-cc: X-bcc: X-Folder: \MTAYLO1 (Non-Privileged)\Taylor, Mark E (Legal)\Deleted Items X-Origin: Taylor-M X-FileName: MTAYLO1 (Non-Privileged).pst PremierInvestorNetwork.com Monthly October 2001 Investors Edition Copyright ? 2001, All rights reserved. Redistribution in any form is strictly prohibited. The entire newsletter is best viewed in COURIER 10 for alignment ================================================================= The Premier Investor Network Presents the Investors Edition for October 2001 ================================================================= In this Investors' Edition: -Mutual Fund Focus for October by MutualInvestor.com- Twelve Safer Equity Fund Bets =======================ADVERTISEMENT============================= Why put all your risk into one stock when you can play the index instead? Learn how to invest in the OEX, QQQ, and SPX. Get intraday market updates, plays, education and daily commentaries by those who know. Sign up for a Two-Week FREE Trial and see for yourself at IndexSkybox.com: http://freetrial.sungrp.com/is/ =======================ADVERTISEMENT============================= =================================== Twelve Safer Equity Fund Bets By Steve Wagner =================================== The objective of this monthly screen is to identify what we're calling safer bets for different equity investment objectives. By safer we don't mean that they can't lose money in any short- term period. Equity mutual funds in general have greater risk (are more volatile) than bond funds and money market funds but have greater long-term return potential. What we're providing here are the more conservative best bets within each objective, those that have produced competitive results with minimal risk and volatility relative to other funds with the same objective. These funds are geared to the average mutual investor who wants to participate in the equity market and is willing to give up a little upside potential to sleep better at night. Each of them has Value Line's highest overall score of '1' as well as a risk score of '2' or better (low risk). Each fund also sports a low expense ratio in relation to their equity objective peers and a low initial fund investment of $3,000 or less. Since return and risk should be considered in light of a fund's investment objective, we break down our safe fund bets in four different equity objectives: growth, growth and income, income, and balanced. Each objective is equity-oriented but varies in terms of their emphasis on growth or income. Mutual investors interested in any one of these funds should do their own 'due diligence' to ensure that the fund meets their investment goal and comfort with risk. No one mutual fund fits all investors. Growth Objective ---------------- Growth funds seek to provide long-term capital appreciation by investing in a diversified portfolio of common stocks. Current income, if considered at all is a secondary concern. Three low risk best bets with growth objectives are as follows: Fidelity Dividend Growth (FDGFX) Gabelli Asset (GABAX) Tweedy, Browne American Value (TWEBX) Tweedy, Browne American Value (5-Year Avg 12.3%, +1.5% S&P 500) buys common stocks with very low price multiples, and since its 1994 inception has consistently maintained a mid-cap value bias. Due to the low price risk of its holdings, the fund's risk score is as excellent as its returns, says Morningstar. They also say that its returns look especially good after taxes. Gabelli Asset (5-Year Avg 13.8%, +2.9% S&P 500) also likes the mid-cap sector, and over the past five years has moved between value and blend styles. Its value approach and diversification across industries and issuers helps limit risk, per Morningstar. Its top-notch returns are the result of great stock picking and willingness to play bold themes, according to Morningstar. Fidelity Dividend Growth (5-Year Avg 15.7%, +4.9% S&P 500) also blends value and growth stocks but prefers to fish in large-cap waters where the fund can fulfill its mandate of holding growth companies which exhibit potential for dividend growth. Its low risk profile results from its avoidance of volatile tech stocks, in addition to tight risk controls. Strong research and equity selection, Fidelity trademarks contribute to an excellent long- term performance record. Growth & Income Objective ------------------------- Growth and income funds seek long-term growth of capital, plus income from dividends. They typically select equities for both their appreciation potential and dividend-paying ability. Three low risk best bets with growth and income objectives are listed below: Dodge & Cox Stock (DODGX) Jensen Fund (JENSX) T. Rowe Price Capital Appreciation (PRWCX) T. Rowe Price Capital Appreciation (5-Year Avg 12.5%, +1.7% S&P 500) specializes in finding opportunities among securities that the market has overly punished for various reasons. It invests in common stocks believed to be undervalued by various measures, such as price/book and establishes relatively large positions in those companies it finds particularly attractive. The fund also invests in fixed income securities and convertibles to give it a risk-adverse profile. Dodge & Cox Stock (5-Year Avg 15.3%, +4.4% S&P 500) also has a value approach but invests primarily in the large-cap sector. Through the years, it has consistently maintained a large-cap value bias. Like the other value funds profiled, the lower price risk of its holdings contributes to its low relative risk score. Morningstar says management's eye for fundamentally strong companies trading at cheap prices has produced results that are tough to argue with and you'll get no argument from me. Jensen Fund (5-Year 13.8%, +3.0% S&P 500) invests primarily in growth companies with long histories of delivering high returns on equity, are in excellent financial condition and have raised dividends in recent years. Since its 1992 inception, the fund has consistently maintained a large-cap growth style bias. The fund invests in growth stocks at a reasonable price and because of management's focus on valuation and quality, fund volatility has been kept low. Income Objective ---------------- Income funds (commonly known as equity-income funds) seek income from the dividends and interest generated by the fund's holdings. Growth of capital is a secondary objective. Three low risk funds with income objectives are as follows: American Century Equity Income (TWEIX) Parnassus Equity Income (PRBLX) Van Kampen Equity Income A (ACEIX) American Century Equity Income (5-Year Avg 14.0%, +3.1% S&P 500) is similar to T. Rowe Price Capital Appreciation in that it buys stock of companies that are beaten down but focuses on companies that can quickly rebound. Though the years, it has maintained a mid-cap value bias. Because it is less patient than other value funds, portfolio turnover is higher-than-average, making it more suited to IRA and other tax-deferred accounts. Parnassus Equity Income (5-Year Avg 13.0%, +2.1% S&P 500) and Van Kampen Equity Income A (5-Year Avg 13.5%, +2.7% S&P 500) are both large-cap value oriented in management style. Management directs its attention toward the issues of well-established, undervalued companies that offer potential income, consistent with safety of principal. Both income funds invest the majority of assets in income-producing equities, with a portion invested in bonds and convertibles to derive a risk-adverse portfolio. Balanced Objective ------------------ Balanced funds seek both income and capital appreciation by investing in a fairly static mix of stocks and bonds, with at least 25% of portfolio assets in bond securities at all times. Three low risk funds with balanced objectives are as follows: Dodge & Cox Balanced (DODBX) Oakmark Equity & Income (OAKBX) Thompson Plumb Balanced (THPBX) Oakmark Equity & Income (5-Year Avg 16.5%, +5.7% S&P 500) buys cheap mid-cap stocks of cash-rich companies for its equity stake and government bonds and high-yield corporate securities for its fixed income allocation. Due to the low price risk of its stock holdings and quirky asset mix, the fund's risk score is very low relative to other domestic hybrids, while generating high return for shareholders. Dodge & Cox Balanced (5-Year Avg 12.7%, +1.9% S&P 500) uses the same large-cap value approach followed by Dodge & Cox Stock for the equity allocation and invests in investment-grade securities for the fixed income stake. This 'traditional' balanced fund is one of the oldest funds in America with roots dating back to the year 1931. Morningstar calls it a category standout, generating strong long-term results for loyal shareholders. Thompson Plumb Balanced (5-Year Avg 14.0%, +3.1 S&P 500) uses a combination of value and growth methods to construct a broadly diversified portfolio of companies with strong franchises, high returns on equity, solid long-term prospects and low valuations. On the fixed-income side, the fund does not make large interest- rate bets, but invests in high-quality, intermediate-term bonds. Because it tends to allocate assets more in equities than other balanced offerings, it is most suitable for investors primarily favoring solid capital appreciation over income. Summary ------- Through the years, I've been asked to recommend 'good' mutual funds. These dozen funds have kept risk low by having 'tight' risk controls and focusing on identifying value opportunities through strong fundamental research. Each of them have beaten the stock market (measured by the S&P 500 index) over the past five years, while minimizing risk relative to other funds with the same objective. Accordingly, they are all 'good' funds in our opinion and safer ways to play the equity market. Most of them are offered on a no-load basis and come with low expenses, adding to their overall appeal. ================================================================= MutualInvestor.com Section ================================================================= WHO IS MUTUALINVESTOR.COM? For most of us, whether we traded our own account or whether we put our money in mutual funds, last year has not been the best for our portfolios. 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