Interesting mutual funds: BRUFX and FPPTX

Barron’s reports quarterly on exchange-traded mutual funds. Most of the report is pointless: short-term performance is essentially random, so looking at what a fund did last quarter is misleading. But the article includes one useful table, shown below.

15-year cumulative top performers
Q4 2006:

18.61% BlackRock:Gl Res;A
17.85% Fidelity Sel Brokerage
17.35% Fidelity Sel Home Fin
17.20% Bruce Fund
17.14% Fidelity Lw-Prcd Stk
17.11% Fidelity Sel Software
17.01% Fidelity Sel Elctronic
16.94% Heartland: Value
16.78% Vanguard Energy;Inv
16.63% Cohen & Steers Realty
16.58% Fidelity Sel Enrgy Ser
16.55% JennDry Jenn Ntl Res;A
16.49% FPA Capital
16.37% Fidelity Sel Financial
16.34% Vanguard HlthCare;Inv
16.09% Royce Fd:Micr-Cp;Inv

For comparison, my favorite old warhorse, Third Avenue Value Fund (TAVFX), has higher 3-year compounded annual growth rate (CAGR) of around 19%, but much lower 10-year rate of about 13%.

In the list above, I discount the sector plays (real estate, energy, health care) because they simply rode a rising tide in those sectors, and it’s thus unreasonable to extrapolate performance. Industry sectors cannot outperform forever, so you would need to be able to predict when to switch out of these and into the next big sector. If you could do that, you would be running a mutual fund, not investing in one. So ignore the sector plays.

This narrows the field of top performers to just Bruce Fund (BRUFX), Fidelity Low-Priced Stock (FLPSX), Heartland Value (HRTVX), FPA Capital (FPPTX), and Royce Micro Capital Trust (RMT).

Of those, the FLPSX strategy seems silly, RMT is closed to new investors, small-caps are currently bid way up (HRTVX). Drop those, and we’re left with just BRUFX and FPPTX.

Conclusion: I still like TAVFX because I have a clear idea how they do what they do. But if I understood BRUFX and FPPTX a bit better, I might like them better than TAVFX.