Managers Name 17 Stocks for the Long Haul
Tuesday January 28, 7:00 am ET
By Christopher Davis
Along with championing the virtues of indexing over active management, legendary Vanguard founder and investing sage Jack Bogle has also been a frequent critic of the fund industry's all-too-common fixation with short-term performance. In the same vein, he has censured fast-trading fund managers, who are about as committed to their holdings as Hollywood celebrities to their wedding vows.
Bogle certainly has a point. After all, paying too much attention to short-term results often leads to performance-chasing--a loser's game for most who play it--and higher turnover, which can increase transaction costs and take a heavy toll on aftertax returns. Investing for the long haul, on the other hand, makes good sense. The market is pretty efficient in incorporating short-term factors into stock prices--analysts have a pretty good idea what General Electric (NYSE:GE - News) will earn over the next quarter or two, for instance--but because the long-term picture is usually more fuzzy, investors have a better shot at making money by focusing on what companies can earn over the next several years, not just the next couple quarters. Further, managers who hang on to their picks for a while get to know them inside and out. It's tough to get to know your companies really well when you own them for just a few weeks.
Of course, we're not arguing managers should exhibit unfailing loyalty to their picks. In retrospect, it's likely most Janus investors wish their funds would have cut their tech and telecom favorites loose in 2000. But with many of our favorites employing a buy-and-hold approach, there's obviously some merit to the strategy. Below we've listed some recent picks from some prominent managers who stick with their holdings for the long haul.
Howard Ward, Gabelli Growth (Nasdaq:GABGX - News)
Although hanging on to media and tech favorites such as Clear Channel (NYSE:CCU - News), Omnicom (NYSE:OMC - News), and AOL Time Warner (NYSE:AOL - News) weighed heavily on returns in 2002, Ward hasn't changed his tune in 2003. While he concedes that recent economic data have been mixed, he's optimistic that businesses will resume spending in 2003, nudging up tech companies' profits. With technology orders picking up and tech stocks showing signs of life in recent months, Ward has ramped up the fund's exposure to cyclical holdings by picking up semiconductor stocks Applied Materials (NasdaqNM:AMAT - News), KLA-Tencor (NasdaqNM:KLAC - News), Taiwan Semiconductor (NYSE:TSM - News), and Linear Technology (NasdaqNM:LLTC - News).
Ward also has established a small stake in Starbucks (NasdaqNM:SBUX - News). He admits there are question marks surrounding how well the company will fare in its overseas expansion, but he likes the company for its brand strength, 20% earnings growth, and solid growth in same-store sales.
Charles Sheedy and Fayez Sarofim, Dreyfus Appreciation (Nasdaq:DGAGX - News)
Sheedy and Sarofim look for mega-cap blue-chip companies with proven and well-known brands. Not surprisingly, the likes of Johnson & Johnson (NYSE:JNJ - News) and Coca-Cola (NYSE:KO - News) have been favorites for years. With steady, fairly predictable earnings, consumer staples names like those have been relatively good performers in the bear market. Despite the recent strength of the sector, the managers think it still may have room to run. Sheedy says food and beverage stocks still have plenty of upside. In fact, the fund purchased Anheuser-Busch (NYSE:BUD - News) in late 2002 due to its strong domestic business and strategic entry into foreign markets. |
