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Forever Funds for the Long Term

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Warren Buffett is fond of saying that the ideal period to hold a stock is “forever.” Not everyone, however, has the stock-picking prowess of that legendary investor. So the next best thing could be to pick a mutual fund that you might be able to hold forever—a fund with a track record that shows staying power. Of course, impressive past performance does not guarantee future strength, but it can be a helpful indicator…and “hiring” a master stock investor (the fund ­manager) to buy and sell stocks on your behalf can allow you to focus on other equally important aspects of your finances.

To help our readers find funds that could serve as smart “forever” holdings, Bottom Line Personal asked research firm Morningstar, Inc., to screen actively managed stock funds based on several criteria. Each fund has outperformed its appropriate benchmark index on an annualized basis over the past 15 years…earned silver- or gold-medal status from Morningstar, which means that the firm’s analysts believe the fund has a good chance of outperforming its benchmark and rivals in its category over the next five years…and charges no load (no up-front sales commission).

Below are the stock funds that passed Bottom Line Personal’s custom Morningstar screen as candidates for long-term investors, including several funds that are closed to new investors but that allow existing investors to increase their holdings. (Some of the funds provide income, and some don’t. For those that do, only yields of 1% per year or higher are listed.)

Large-Cap Funds

Funds in this category meet all the criteria above and outperformed the Standard & Poor’s 500 stock index over the past 15 years.

Open to new investors…

AMG Yacktman Focused (YAFFX) invests in companies selling well-known products but keeps up to 25% of its portfolio in cash when it becomes difficult to find stocks at bargain prices. It is not a highly diversified fund—it recently held just 19 stocks. Performance: 10.9%.* Yield: 1.3%.

AMG Yacktman (YACKX) is a more diversified, less volatile version of the focused fund above. Performance: 10.5%. Yield: 1.7%.

Fidelity Contrafund (FCNTX) invests in blue-chip growth stocks that the managers believe have been underestimated. Performance: 10%.

FMI Large Cap (FMIHX) buys stocks when they are out-of-favor and sticks with its picks for five years or more. Performance: 9.3%. Yield: 1%.

Parnassus Core
Equity
­(PRBLX) is one of the largest “socially conscious” funds, avoiding companies that get substantial revenue from alcohol, tobacco, gambling and/or weapons. Performance: 9.3%.

T. Rowe Price Blue Chip Growth (TRBCX) seeks large companies that can thrive even if the economy continues to grow slowly. Performance: 9%.

Mairs & Power Growth (MPGFX) invests mostly in companies headquartered near its offices in the upper ­Midwest, a region with a particularly high concentration of multinational corporations. Performance: 8.7%. Yield: 1.3%.

Dodge & Cox Stock (DODGX) buys shares of troubled companies on the cheap and then waits for big turnarounds. Performance: 8.4%. Yield: 1.2%.

Vanguard Equity-Income (VEIPX) picks dividend-paying companies with the ability to increase their dividends. Performance: 8.2%. Yield: 2.6%.

Oakmark (OAKMX) buys stocks when they are selling for at least 30% less than what the fund managers ­believe they are worth. Performance: 8.2%.

BBH Core Select (BBTEX) favors companies with steady cash flows and holds just about 30 stocks. Performance: 8.1%.

T. Rowe Price Dividend Growth (PRDGX) focuses on companies that can steadily raise their dividends. ­Performance: 7.9%. Yield: 1.4%.

Closed to new investors: Vanguard Capital Opportunity ­(VHCOX), performance 11.5%…Fidelity Growth Company (FDGRX), performance 11.1%…Vanguard PrimeCap Fund (VPMCX), performance 10.4%, yield 1.1%…Vanguard Dividend Growth (VDIGX), performance 8.2%, yield 1.7%…American Century Equity Income (TWEIX), performance 8.1%, yield 1.8%.

Mid- and Small-Cap Funds

These funds outperformed the Russell 2500 Index over the past 15 years.

Open to new investors…

AMG Managers Fairpointe Mid Cap (CHTTX) invests in companies with strong brands. Performance: 10.6%.

Artisan Mid Cap Value (ARTQX) hunts for cash-rich companies whose profits have disappointed investors in the short term. Performance: 10.5%.

Royce Premier Investment ­(RYPRX) picks what it calls “premier” small companies that dominate their business niches. Performance: 10.4%.

Fidelity Low-Priced Stock ­(FLPSX) has $38 billion in assets spread across more than 880 holdings. It recently had about 35% of its portfolio in ­foreign stocks. Performance: 9.9%. Yield: 1.1%.

FMI Common Stock (FMIMX) uses the same investment strategy as the FMI Large Cap fund above. ­Performance: 9.8%.

T. Rowe Price QM US Small-Cap Growth Equity (PRDSX) is a “quant” fund, meaning that it uses a computer model to pick stocks based on measurements such as historical valuations, quality of earnings and recent share price movement. Performance: 9.6%.

Closed to new investors…

T. Rowe Price New Horizons ­(PRNHX), performance 12%…
T. Rowe Price Mid-Cap Growth ­(RPMGX), performance 11%…Brown Capital Management Small Company Fund (BCSIX), performance 10.9%…Longleaf Partners Small-Cap (LLSCX), performance 10.3%…T. Rowe Price Mid-Cap Value (TRMCX), performance 9.9%…Meridian Growth Legacy (MERDX), performance 9.6%…Artisan Mid Cap (ARTMX), performance 9.5%.

Foreign Funds

These funds outperformed the MSCI EAFE Index over the past 15 years.

Open to new investors…

Oakmark International (OAKIX) seeks large companies at steep discounts. Performance: 8.5%. Yield: 1.3%.

American Funds EuroPacific Growth (AEGFX) uses nine fund managers, each running a different section of its $145 billion portfolio. Performance: 7.6%. Yield: 1%.

Vanguard International Growth (VWIGX) can be more volatile than its peers because of a 20% allocation to emerging-market stocks. Performance: 7.5%. Yield: 1%.

Tweedy, Browne Global Value (TBGVX) invests in companies with dominant brands when share prices are cheap. Performance: 7.2%. Yield: 1%.

Causeway International Value (CIVVX) buys stocks of companies in the midst of short-term crises. Performance: 6.5%. Yield: 1.5%.

Fidelity Overseas (FOSFX) focuses on large European and Asian companies. Performance: 6.5%. Yield: 1.5%.

Closed to new investors: Dodge & Cox International Stock (DODFX), performance 8.2%, yield 1.9%…­Artisan International (ARTIX), performance 6.1%.

*All performance figures in this article are annualized returns for the 15 years through May 31.

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Source: The Bottom Line Personal mutual fund screen was performed by Michelle Swartzentruber, a senior research analyst at Morningstar, Inc., Chicago, which tracks 540,000 investment offerings. Date: August 15, 2017 Publication: Bottom Line Personal
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