Kinnel: My Top 10 Holdings
These funds make up the core of my portfolio.
A version of this article originally appeared in the May 2018 issue of Morningstar FundInvestor.
Over the course of a year, I share a lot of investment ideas. I can't invest in all of them, though, so I thought I'd take some time to share what I actually own.
My portfolio doesn't change much. I added one fund in the past 12 months. Yes, there is overlap among my funds, but I have three different account types with overlapping goals.
My selection philosophy is the same one I've spelled out before: Invest for the long term in a balanced portfolio and don't let events throw you off course. Most of these funds have been in my portfolio for at least 10 years--some more than 20.
I look for low-cost funds with stable, skilled management teams and sound strategies overseen by trustworthy fund companies. Or, to put it another way: I look for funds with strong sustainable competitive advantages.
I'll take a look at them in order of their weighting in my portfolio.
Dodge & Cox International Stock (DODFX)
Sometimes I visit a fund company and get excited by all the new ideas and technology it is bringing to the challenge. But Dodge & Cox doesn't offer that. It is compelling, not exciting, because of the tremendous stability and brainpower brought to bear on its portfolios.
The firm is entirely owned by employees, and thus they have a strong incentive to do the right thing for the long haul rather than to maximize next year's bonus. Everyone at Dodge & Cox sings from the same hymnbook of value investing. The funds are team-run so that one retirement doesn't rock the boat.
Dodge & Cox charges low fees right away when it launches a fund rather than asking shareholders to subsidize its expansion via high fees. This is simply an excellent value approach to foreign equities. I bought it a couple of years after it was launched, which was a few years before it launched Dodge & Cox Global Stock (DODWX). I might buy the latter instead if I were to do it over again from the beginning. I own Dodge & Cox International Stock in my taxable account and my 401(k).
Vanguard Primecap Core (VPCCX), Primecap Odyssey Aggressive Growth (POAGX), and Vanguard Capital Opportunity (VHCAX)
You knew this was coming. I hadn't set out to buy three separate funds from Primecap, but Vanguard Capital Opportunity was freshly under its control in the mid-1990s when I bought it for an IRA. Later, Vanguard Primecap Core came out, and I added it to my taxable account. Then, Morningstar added Primecap Odyssey Aggressive Growth to its 401(k) offerings, and I hopped on that. Historically, Primecap's best returns have come from small/mid-cap funds. That's what Vanguard Capital Opportunity was when I bought it, and that's what Primecap Odyssey Aggressive Growth was when I added it.
Like Dodge & Cox, Vanguard is a stable firm that charges reasonable fees. If you summed these three, they'd account for more than my Dodge & Cox holding. I guess I have faith.
Vanguard Tax-Managed Capital Appreciation (VTCLX)
This is my largest passive holding. It starts with the Russell 1000 and tilts away from dividend-paying stocks. Management actively harvests tax losses in order to avoid capital gains payouts. It's really an ideal fund for taxable accounts, and it has beaten its benchmark and peers on a before-tax basis as well as aftertax.
American Funds New World (RNWFX)
This continues my theme of stability and low costs. We have the R5 shares in our 401(k), but the A shares charge an attractive price, too. This is a good emerging-markets fund for a 401(k) because it is tamer than most and cheaper than just about any actively managed fund. The tameness comes from the fund's unusual structure. It includes developed-markets equities that derive significant revenue from emerging markets along with actual emerging-markets securities. This dials down volatility, though you miss a bit of the upside.
Jensen Quality Growth (JENSX)
This is a fund I bought in 2009 in my taxable account as the world was melting down. High-quality funds have great defensive properties, so I figured this was one of the safer bets around. It continues to invest in high-quality names, and I keep on owning it.
Vanguard International Growth (VWILX)
This is a sneaky good fund. With two subadvisors, the fund has a very diversified portfolio and therefore rarely catches investors' attention. But it turns out that two good subadvisors plus really low costs (0.32%) works quite nicely. This longtime 401(k) holding of mine has pummeled the index and peers over the past five-, 10-, and 15-year periods.
American Funds Washington Mutual (RWMFX)
This is a nice straightforward equity dividend play. Low costs ensure that you get most of that yield yourself (fees are paid via a fund's income, so there's a 1-for-1 reduction in yield for each basis point in expenses). To avoid stretching for yield, the fund requires that companies have paid a dividend in eight of the past 10 years and earned that dividend in four of the past five. I have this in my 401(k). And no, there is no front-load for funds in our 401(k) and this is also available without a load in most fund supermarkets.
Artisan Global Value (ARTGX)
This is one of the more pure stock-picking funds I own. Run by two-time Morningstar International-Stock Fund Managers of the Year David Samra and Dan O'Keefe, this is a focused value fund. Management is wary of debt and shaky management practices, so the fund has generally held up well in downturns, though there are no guarantees. Management has also been good about closing the fund when needed, and that gives me confidence that it will continue to serve shareholders well. We recently upgraded it to Gold.
Russel Kinnel has a position in the following securities mentioned above: VWILX, VPCCX, DODFX, JENSX, POAGX, VTCLX, RWMFX, ARTGX. Find out about Morningstar’s editorial policies.