(PUB) Investing 2015

3

December 2015

Morningstar FundInvestor

There are a lot more red dots than blue in this picture because about one third of this fund’s assets under management walked out the door over the past 12 months. The fund often lags when growth is in favor, and it is currently in one of those droughts. To manage this, Yacktman is spreading its sales through 14 of its names during the quarter. Interest- ingly, the managers did so in very even numbers. All but two of the stocks were sold in units divisible by 100 , 000 shares. (I haven’t seen that before.) Among Stephen Yacktman and Jason Subotky’s bigger sales were Cisco Systems CSCO and Coca-Cola KO , each of which were trimmed by 2 . 4 million shares. Because they own mostly large-cap stocks, they aren’t likely to have a big market impact as they sell. Still, it is a tricky business, as managers need to keep looking for good new ideas even if most of what they are doing is selling. And, in fact, these managers did add shares of Twenty-First Century Fox FOX and Oracle.

Vanguard Dividend Growth VDIGX: This isn’t equity income.

Vanguard Div Growth VDIGX

Valuation Value

Blend

Growth

1 Buys 1 Sells

Market Capitalization Small Mid Large

Many of this fund’s purchases are in the blend or growth sections, and it really drives home the difference between dividend growth and equity income. Equity-income funds prioritize yield above everything else, and that leads them to value names with limited growth potential such as utilities. But simply changing the emphasis to companies with the potential to raise their dividends means you refocus on companies with earnings growth and strong balance sheets. Thus, we can see that, in the second quarter, Donald Kilbride was adding names like Johnson & Johnson JNJ and Oracle ORCL .

Vanguard Primecap VPMCX: The hunt for fallen growth.

Vanguard Primecap VPMCX

Valuation Value

Blend

Growth

1 Buys 1 Sells

Market Capitalization Small Mid Large

AMG Yacktman YACKX: Managing redemptions.

AMG Yacktman YACKX

Valuation Value

Blend

Growth

1 Buys 1 Sells

While momentum managers look for companies with surging earnings and rising stock prices, other growth managers like to buy on dips when a company hits a speed bump so they can get a little more price protection. To buy on bad news, however, you need a lot of conviction, and that requires a lot of research. That’s what Primecap does. As you can see, there’s a preponderance of buys in the blend zone

Market Capitalization Small Mid Large