American Funds Washington Mutual Prioritizes Investment-Grade Firms

Notable investment talent and a time-tested approach back American Funds Washington Mutual’s AWSHX High People and Above Average Process Pillar ratings.

This strategy is in the hands of experienced investors. Alan Berro, who heads the nine-manager team, started in the industry in the 1980s and has run money here since the late 1990s. The other eight managers each have more than 20 years of investment experience. Behind the management team sits a deep and talented analyst team, which consists of more than 100.

Income drives this strategy’s guidelines, but it does have some flexibility in investing in non-dividend payers. The strategy prioritizes U.S. investment-grade companies with a long history of paying dividends, but leadership has wisely updated the guidelines in response to seismic market shifts over the years. For example, during the pandemic, the fund’s board granted temporary approval for managers to continue holding stocks like General Motors GM, which suspended its dividend in the wake of the coronavirus pandemic before reinstating it this year. The managers can also allocate a small portion of the fund’s assets to non-dividend payers that combine ongoing superior profitability with modest leverage relative to industry peers such as Alphabet GOOGL/GOOG.

Prior to late 2022, the strategy excluded companies that derive most of their revenue from alcohol or tobacco products. But with potential increased legislation around what constitutes environmental, social, and governance-focused funds, Capital Group removed the restriction to avoid being classified as an ESG fund. As of March 2023, tobacco giant Philip Morris PM was a top-10 holding and it held modest positions in two other tobacco companies and one alcohol firm.

This strategy has succeeded by losing less than rivals and its benchmark in downturns as it did last year. Since Berro’s 1997 start, the strategy has held up better than the S&P 500 in all but four market declines of 10% or more. In 2022, the strategy lost less than the index, and landed in the large-blend Morningstar Category’s top decile. It had strong picks across the board, but industrials firms such as Northrop Grumman NOC and technology semiconductor giant Broadcom AVGO led the charge.

While the fund’s value-oriented approach isn’t always in fashion—it’s lagging in 2023′s first half—its quality criteria and managerial talent make it an attractive option for risk-averse investors.