BlackRock hopes new hire will help fix Total Return Bond fund and more.
True to form, Dodge & Cox
Dodge & Cox has a record of success with contrarian bets. For example, it bought Motorola in 2003, before the firm's split into Motorola Mobility and Motorola Solutions. The stock experienced a deep decline after 2006, but the fund held on to its stake, which paid off earlier this year when Motorola Mobility was acquired by Google at a 63% per-share premium.
Meanwhile, the stock of Bank of America, which is 1.4% position in the fund, has lost more than 50% for the year to date. The firm's 2008 acquisition of Countrywide Financial entangled it in billions of dollars of mortgage-related liabilities. Hewlett-Packard, which is a 3.8% position in the fund, has lost 40% for the year to date amid investor uncertainty about the future of the firm's computer business.
While the managers of Dodge & Cox Stock do not invest based on sector
calls, their decisive move into Bank of America corresponded with the fund's
adding to its positions in several other financial stocks in the third
quarter. A number of financial institutions are still trading below book value
after being punished in 2008 even though they have more capital, fewer bad
loans, and more secure sources of funding than they did three years ago. As is
the case with the Bank of America, however, the fund added to positions in
financial firms that continue to grab negative headlines, like Goldman Sachs
The case of Hewlett-Packard demonstrates a particularly long-term horizon and strong conviction. It has owned the stock through multiple iterations of the firm's management-related turmoil, buying it at times during its darkest hours and trimming following rallies. For now, the stock is a drag on fund performance, but the fund's army of veteran analysts still see competitive advantages at the tech giant.
Is a New Manager Really the Answer for BlackRock Total
BlackRock Total Return
The latest recruit is Bob Miller, whose last position at Bank of America was managing an internal multiasset fund for several years. He left in 2007 to help start Round Table Investment Management, a hedge fund firm, where he managed global macro and long/short strategies until 2009. He had been out of the investment business since then. Returns were not made available for the funds that he managed at Bank of America and Round Table.
While there is no hard evidence yet that Miller's addition will help the fund's performance, it's clear that BlackRock wanted to make sure that Miller worked well with the team and understood the fund's strategy before officially naming him manager. BlackRock hired Miller in July with the intention of making him a comanager of Total Return, but he has since spent that time working with the team until being named manager this week.