3 Large-Value Funds Heavy in Tech

Susan Dziubinski: Hi, I'm Susan Dziubinski with Morningstar.com. Investors don't usually associate technology stocks with value investing. But given the many different ways one can define value, it's not unheard of for value investors to own technology stocks. Here are three Morningstar Medalist funds in the large-value category holding more than 20% of their portfolios in the tech sector.

Greg Carlson: Bronze-rated Artisan Value is a large value fund that's held a significant stake in tech stocks over time. For example, for the past several years, both Alphabet and Apple have been near the top of the portfolio as its managers feel those companies still look attractive based on their cash flows. The fund also bought Facebook in the second quarter of 2018 after the stock was hit hard over regulatory concerns. As a result, the fund's tech weighting is recently 22% of assets, roughly double that of the Russell 1000 Value benchmark as well as the typical large-value fund.

Alec Lucas: Boston Partners All-Cap Value, managed by Duilio Ramallo since 2005, uses the firm's firmwide approach which focuses on stocks with a combination of an attractive valuation, sound business fundamentals, and positive business momentum, and that's led Ramallo to tech stocks much more than its Russell 3000 Value Index. He has had a 10 to 15 percentage point overweight in tech stocks consistently since early 2012. As of June of this year, 2018, he had about 24% of the fund's assets in tech stocks which was in line with the broader market but about 14 percentage points more than his benchmark. He held Cisco and Alphabet, for example. Ramallo has a good track record under his tenure including good performance during the financial crisis, and we think this is an attractive long-term option.

Gregg Wolper: Sound Shore Fund is an unusual offering in several ways. First, its managers have been there an extremely long time. Two of them actually founded the fund in the mid-1980s and the third one joined them in the 1990s and became a listed manager 15 years ago. None of the managers have left. Their analysts have also been there a long time. Their four analysts have been there 10 years at least. They use a flexible value approach. That means that while they are fairly value-oriented, they don't want broken-down companies. They want good-quality companies. That leads them to have more technology than most value funds ordinarily have. It's a fairly compact portfolio, only about 40 names typically; now it's actually 35. That could be risky, overly concentrated. But by holding only 4% or even less in the top holdings, they mitigate that risk and give you a smoother ride.