“…even amid a robust market environment that saw every major stock index climb for the year, a handful of fund managers stood out as the cream of the crop. These were the people and firms that were still able to outperform, even though equities and other risk assets were so strong across the board. Presented below are the results of our discussions with these investing heavyweights, who broke down their methodologies, what they did right, and what their attack plan would be going forward….
Yacktman opened the doors to YCG, his Austin, Texas-based firm, right around the market top in 2007. He survived the crisis and has since come a long way, delivering market-beating returns on one-, three-, and five-year bases.
Yacktman attributes his success to a strategy of finding “boring,” high-quality stocks that stand the test of time while avoiding those that are being chased by impatient investors. In his view, the behavioral tendency of wanting to get rich quickly leads to a systematic overpricing of popular, low-quality stocks and a systematic under-pricing of the boring, higher-quality companies. He determines “quality” using a few yardsticks. They include strong pricing power through which a company can grow its sales volumes without requiring lots of capital and high insider ownership so that executive incentives are aligned with the company’s success.
What worked in 2019: The one that surprised us – more than beaten our expectations by far- is MSCI. It is just a juggernaut. They’re the gold standard for international indices. Even though it’s wildly outperformed our expectations and is up 70% over the last 12 months, I still think that it’s a great long-term buy. We’ve owned it since 2012.
What’s ahead in 2020: The biggest concern I probably have is that all of these low rates have led to a debt binge and loaded up asset prices everywhere – in private equities, public equities, and venture capital. And so you could have an impending corporate-debt crisis. You don’t want companies that are reliant on capital markets. Before WeWork collapsed, I was saying, It’d be crazy to invest in that thing. I’d say the same thing about Netflix, Tesla – these are companies that people get really excited about. But they’re reliant on the kindness of capital markets.”
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Earnings Growth is not a measure of the Fund’s future performance.
The Morningstar Rating™ for funds, or “star rating”, is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history, without adjustment for sales loads. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product’s monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating™ for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating™ metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods. The YCGEX Fund was rated against the following numbers of Large Blend Funds over the following time periods as of 03/31/2020: 1214 funds overall, 1127 funds in the last three years, and 982 funds in the last five years. With respect to these Large Blend Funds, YCGEX Fund received a Morningstar Rating of 5 stars, 5 stars and 5 stars for the overall, three-, and five- year periods, respectively.
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Morningstar ranked YCGEX in the top 10%, 3% and 3% out of 1229, 1127 and 982 for the Large Cap Blend Category for the one-, three- and five-year periods ending 03/31/2020, respectively. Morningstar Rankings represent a fund’s total-return percentile rank relative to all funds that have the same Morningstar Category. The highest percentile rank is 1 and the lowest is 100. It is based on Morningstar total return, which includes both income and capital gains or losses and is not adjusted for sales charges or redemption fees.
Credit ratings are grades given to bonds that indicate their credit quality as determined by a private independent rating service such as Standard & Poor’s. The firm evaluates a bond issuer’s financial strength, or its ability to pay a bond’s principal and interest in a timely fashion. Ratings are expressed as letters ranging from ‘AAA’, which is the highest grade, to ‘D’, which is the lowest grade. In limited situations when the rating agency has not issued a formal rating, the rating agency will classify the security as nonrated.
For standardized performance, current expense ratios, and Morningstar ratings, please click here. Performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Performance data current to the most recent month end may be obtained by calling 1-855-444-9243. Investment returns and principal value will fluctuate, and when sold, may be worth more or less than their original cost.
