Forester Discovery Fund:
A little fund that could, maybe.
When hunting for solid performing funds, you never know what you'll find. Take the Forester Discovery Fund, for instance. It's a tiny fund in a world of opportunity.
Tom Forester is the portfolio manager of the Forester Discovery Fund (INTLX). It's one of two funds in the family named after this portfolio manager (the other is the Forester Value Fund).
Forester is a value guy who gets his value investment education from the best investors in recent history---Sir John Templeton and Warren Buffett. "I used to run money for John Templeton and I've always been a follower of his philosophy: You know, you have to keep your eye on the price."
Forester said that "price" is the major determinant on the kind of return you'll get from an investment. And, that when things are very expensive, you don't have much of a chance of getting much of a return---makes sense, doesn't it?
As for Buffett, Forester has been a follower of his market moves lately ---or lack of them. As a result, Forester has stayed out of stocks recently because he, and Buffett, have felt that the market is too expensive.
"There are times, as Buffet says, when the best thing to do is sit it out," says Forester. So, at least for now, you won't find any stocks in the Forester Discovery Fund's portfolio---only cash, money market and short-term treasury kinds of investments.
What drew me to the Discovery Fund was its past performance. For the last three years, this fund has ranked in the top percentile of all International Funds, according to Lipper. For the past year, ( March 31, 2002 through March 31, 2003) the fund was ranked No. 1. During the first quarter of this year, it ranked No. 6 out of 872 funds n the grouping. As of April 24, the fund was up 0.20 percent while the average International Fund was down 1.35 percent.
What cautions me about the fund is that it only has $1 million in assets, which isn't very much for a fund with a three-year track record. And, that the fund's investment philosophy hasn't been tested in up markets. So, let's call this a fund to watch. Additionally, because it's such a small fund, there is little independent commentary about it available.
For interested investors, the best way to learn more about this fund is by visiting its web site at : www.forestervalue.com , then, e-mailing the fund directly.
Here's more from Forester, about the Forester Discovery Fund:
Q: Why is the portfolio 100 percent in cash right now?
A: We use cash to avoid excessively over valued times. It's rare to have to go to cash, but when the S & P is trading at twice all time record levels, it's the only prudent move out there.
Q: Isn't it hard to keep that discipline and not buy stocks now.
A: It's tremendously difficult. Patience is very difficult especially when everything you read says you should be 100 percent in stocks. But you have to stick to your discipline because it's the only way that you do well long-term.
Q: On your web site you talk about "absolute" returns. Tell me more about that.
A: For 20 years now people have been told the mantra, buy and hold, buy and hold, buy and hold. And in a bull market that works great. I was fully invested for all of the 1990s and it wasn't until things got just ridiculously overvalued that it was time to pull out. What absolute returns seeks to do is give you hedge fund like returns in down markets---in other words positive returns. But at the same time, hedge funds don't give you that good of a return when the equity markets are going up. So, what I'm looking to do is make you money when the markets are falling apart and then make you a lot more money when the markets are going up.
Q: I know you're always looking for some buying opportunities. Any companies look interesting to you right now?
A: Sure. A couple of them are Bayer, Royal Ahold, there are a grocery chain based in the Netherlands; Barclay's Bank and Aegon, the insurer.
Q: What about the risks for investing in this fund right now.
A: Two risks are that I don't get fully invested quickly enough so that maybe you loose a little upside. But you figure you've already missed 40 percent downside so if you lose a little bit of the upside , it's not so bad. The second is, if value happens to be out of favor. You've got that risk as well.
Dian Vujovich is a nationally syndicated mutual fund columnist, author of a number of books including Straight Talk About Mutual Funds (McGraw-Hill), and publisher of this web site.
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