Fundmastery Blog

Kurt Brouwer September 10th, 2007

In this piece, All-Weather Portfolio, Shefali Anand at the Wall Street Journal [subscription required] did a profile of Brouwer & Janachowski and one of our core portfolios–Growth & Income. It was a rather long piece, so I will not try to go through all of it. Instead, I recommend you read the whole thing. Here are a few excerpts [emphasis added]:

‘Feeling nervous about your investments amid the recent market volatility? If so, you may want to consider reducing your riskier holdings. That’s the message from financial-advisory firm Brouwer & Janachowski Inc.

In this column, we ask prominent financial advisers who invest in mutual funds and exchange-traded funds for their clients to share their model portfolios with us. Kurt Brouwer and Steve Janachowski have been advisers for 20 years, and their Tiburon, Calif., firm manages $610 million for individuals and institutional clients like the Stanford Business School Alumni Association and the Foundation for Child Development, in New York.

Here they share the details of their growth-and-income portfolio, meant for people in retirement or close to it. They call it an all-weather portfolio — one that will generate good returns through market ups and downs.

The advisers like to invest with fund managers who have successful long-term track records, and plan to hold these funds for as long as possible. They don’t make bets on what type of investment will be in favor at any point, such as large- or small-company stocks, or those of companies with rapidly expanding earnings versus those of companies with steadier but less flashy results…’

Update: I added a bit more from the piece on some of the mutual funds in the portfolio:

‘…The portfolio currently holds 18 funds. Here are the details:

U.S. STOCKS: The two largest holdings are the Primecap Odyssey Growth fund, to which the advisers allocate 8% of their portfolio, and the Selected American Shares fund, at 7%. Both funds invest in U.S. large-company stocks, but with slightly different approaches.

Selected American Shares is run by Chris Davis and Ken Feinberg, who look for good-quality companies whose shares may be selling at low prices temporarily. The advisers have held this fund since 1994, and have found it to be a “steady performer” in all kinds of markets, Mr. Janachowski says.

In general, growth stocks can be among the priciest around, because investors are willing to pay more for companies whose earnings are expanding at above-average rates. But the stock pickers at the Primecap fund look for shares of fast-growing companies that may be out of favor. While the fund has been around only since 2004, the managers have been advising funds offered by Vanguard Group for many years.

Mr. Brouwer and Mr. Janachowski also have 4% of their portfolio in the Primecap Odyssey Aggressive Growth fund, which has a similar investing style but ends up buying many smaller companies.

Like the Primecap funds, many of the other growth funds in the portfolio are very “value-conscious,” says Mr. Brouwer. An example is the Chesapeake Core Growth fund, to which the advisers allocate 4.5% of their portfolio. The fund’s managers look for companies that have some internal catalyst that will drive growth but that the market hasn’t recognized yet, making their shares relatively cheap.

The advisers say the recent market volatility, which has featured several days in which the Dow Jones Industrial Average fell by triple-digit amounts, could be a boon for the growth-stock funds they hold, as there are many stocks that dropped to levels the fund managers might consider cheap.

The lower prices could also be a boon for value-oriented fund managers, like those at Longleaf Partners Fund, to which the advisers allocate 4.5%. Fund managers Mason Hawkins and Staley Cates look for dirt-cheap stocks and often favor what the market seemingly hates…’

As I said, hopefully you can read the whole thing (try this link is you have trouble getting the article).  We have previously featured some of the other mutual funds mentioned in this story: FPA Capital and FPA New Income and Oakmark Select plus Wintergreen Fund. Or, for a general piece on mutual funds see Why I Like No-Load Mutual Funds.

• Investing , Mutual Funds
• Comments(1)

Did you enjoy this article?

• Subscribe to Fundmastery Blog by e-mail »
• Subscribe to Fundmastery Blog's RSS feed