(PUB) Investing 2015

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even though they run a growth fund. That’s why the managers like it when a favorite biotech or tech name has a temporary sell-off. For example, the managers boosted their stake in fallen HP HPQ when it dipped in the second quarter. The stock fell some more in the fall, but the Primecap folks are patient investors, so that doesn’t make it a mistake. The same is true of LM Ericsson ERIC , which got cheap in the second quarter and has since gotten cheaper. On the other hand, they added to Progressive PGR , which was trading around where it had traded for a while in the second quarter, and the stock has since taken off. They also bought tech highflier NetApp NTAP on a dip in the second quarter.

T. Rowe Price Capital Appreciation PRWCX: Growth at a reasonable price.

T. Rowe Price Cap App PRWCX

Valuation Value

Blend

Growth

1 Buys 1 Sells

Market Capitalization Small Mid Large

Royce Special RYSEX: Focusing on small value.

Royce Special RYSEX

Valuation Value

Blend

Growth

David Giroux wants blue-chip stocks trading at modest multiples. As you can see, though, he was buying names all over the style box. This fund isn’t pegged to one corner of the style box as it is meant to be a broad core holding. Giroux views valuations differently for growth stocks versus cyclical stocks. For cyclicals, he wants companies trading cheaply relative to what they can earn over a full market cycle. Thus, he trimmed AutoZone AZO even though it was far into growth territory, perhaps because it was trading near a five-year high in the third quarter. Conversely, Johnson Controls JCI was added in the third quarter at a multiyear low. He also added to one of his favorite stocks: Marsh & MacLennan MMC . The insurer’s shares were depressed by a strong dollar and weak emerging markets, but some say the under- lying businesses remained strong. Final Thoughts It helps to understand your manager’s process so that you can use the fund wisely and find complemen- tary funds for your portfolio. As you can see, some funds are quite focused within one corner of the style box and others are more diffuse. As such, their performance will be fairly different. For that reason, it is often a good idea to have some of both types. K

1 Buys 1 Sells

Market Capitalization Small Mid Large

Clearly the style box captures some of what Charlie Dreifus is doing. Nearly all his trades occurred in the small-value realm. Dreifus places strong emphasis on price and accounting. He avoids any companies with a hint of accounting gimmickry in favor of those with healthy balance sheets but whose shares are trading at low valuations. For example, he bought Vishay Intertechnology VSH in the third quarter. The semiconductor maker’s stock was hit hard, but its low levels of debt likely attracted Dreifus.