A Risk-Conscious Value Fund That's Worth Getting to Know

Gregg Wolper: If you haven't heard of Sound Shore Fund (SSHFX), that's not surprising. They are not from a big fund company, and they don't do much marketing at all--very little. They don't do any advertising. But they are worth getting to know.

One of the most impressive traits is the longevity of the managers. Harry Burn and Gibbs Kane founded the firm way back in the '80s, and now it's in its thirtieth year. They have been running the fund the whole time, and no managers have departed in all that time. The third manager, John DeGulis, started as an analyst in the mid-'90s and became a manager more than a decade ago. So, he is the newcomer; but even he has quite an amount of experience on the fund. The analyst group doesn't have quite that longevity, but it has been around for quite a while as well and has been very stable.

The approach they use could be called flexible value. That means they are not going for the deepest broken companies, hoping for a big score when they turn around--if they turn around. They try to reduce risk by allowing the company to come back some--to show some signs that it really is recovering--and then buy in. That gives up some of the early gains, but they are willing to do that to reduce the risk.

Now, it doesn't always work out as intended--or, at least, the companies don't recover as quickly as intended. A big example was when they bought some of the big banks after the financial crisis; they thought they had recovered by then--it had been a while--but the market disagreed and was still very doubtful. So, they had a tough year. But they did bounce back and, over the long term, they have a very impressive record as a value fund. And given the stability of the firm and their dedication to this one strategy, it seems like it should continue for quite some time.