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A Large-Value Fund That Wins by Losing Less

Susan Wasserman

Susan Wasserman: Invesco Diversified Dividend (LCEAX) is a stand-out strategy. Meggan Walsh has led this fund since the end of 2002, and she's joined by two co-portfolio managers and three analysts. Together, the team looks for stocks that will return capital to shareholders and generate strong free cash flow growth. 

The fund is noticeably overweight consumer-staples and consumer discretionary stocks relative to the Russell 1000 Value Index. This comes mainly at the expense of financials and energy stocks, which the fund underweights relative to the index. The team focuses on the balance-sheet strength of stocks and largely ignores quantitative factors in the evaluation process, which can cause it to lag in momentum-driven rallies. On the flip side, thanks to the team's quality bias, the fund tends to outperform the index and the category during market downturns.

The net effect is positive. Since Walsh took over, the fund has outpaced the index and the category norm on a total-return and risk-adjusted-return basis. As an added bonus, each of the share classes ranks among the cheaper options within their fee-level-distribution groups. All told, this Silver-rated fund is a strong option for those looking for a large-cap-value investment.