Stock funds that are loading up on cash can provide defense in case the market retreats. Although their performance tends to lag when the market is climbing, they can offer a cushion if stocks turn downward in this ninth year of the bull market. A big cash stake tends to reduce losses and provides money to invest when stock bargains emerge. The following cash-heavy funds are highly rated by Morningstar Inc.: AMG Yacktman (YACKX) recently had a 23% cash stake, which is near its highest amount ever…FMI Common Stock (FMIMX), 18.5% cash…FPA Crescent (FPACX), 13%.

These highly regarded funds aren’t simply timing the market. Holding alternately greater and lesser amounts of cash is part of a disciplined, cautious, long-term strategy. Cash levels in their portfolios rise into double-digit percentages when managers believe that stocks are pricey and opportunities are scarce. But they buy with conviction when valuations fall enough to meet their criteria. That requires a lot of patience from fund shareholders because even though these funds rank near the tops of their categories over the past 10- and 15-year periods, they can underperform their peers for years in strong, rising markets like the one we’ve had.

How each of these funds could fit into your portfolio…

AMG Yacktman. Fund manager Stephen Yacktman hunts for very large companies that have rich cash flows and little debt and whose stock prices have been beaten down temporarily due to events such as earnings disappointments or management changes. The portfolio is dominated by consumer and technology companies with well-known brands such as Samsung Electronics and PepsiCo. Performance: 9.5%.*

FMI Common Stock. The fund picks small to midsized firms that operate under the radar of most investors but are very profitable and dominate their niche markets. This year, comanager Patrick English has been finding these stocks in the industrial and financial-services sectors. Names recently included FirstCash, which operates pawn stores in the US and Latin America, and Armstrong World Industries, a manufacturer of flooring and ceiling products. Performance: 8%.

FPA Crescent. Steven Romick has run this eclectic fund since its inception in 1993. He has the freedom to invest like a hedge-fund manager in stocks, fixed-income, even private equity—wherever he sees the greatest value. Recently, Romick had one-third of the fund’s assets in US government bonds and more than half in stocks, and top stock holdings included Oracle and Naspers, a large South African Internet and media company. Performance: 6.6%

* Performance figures are annualized returns for the 10 years through May 31, 2017.

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