Croft Value Fund

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Note: Profile written for different share class.


The fund has returned 23.66 percent over the past year, 11.61 percent over the past three years, 16.09 percent over the past five years, and 8.63 percent over the past decade.

Trailing Returns Updated 06.30.2014
Year to date 6.7%
1 Year 23.7%
3 Years (Annualized) 11.6%
5 Years (Annualized) 16.1%
10 Years (Annualized) 8.6%

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Deep research and a near-constant cycle of investment ideas defines Croft Value Fund, according to manager Kent Croft. “There’s a laser focus on one thing,” he says. “That’s idea generation.” Croft, along with his brother Russell and father Gordon, takes a long-term, low-turnover approach to investing, seeking out unique companies with growth potential that are trading at a discount.

As of July 03, 2014, the fund has assets totaling almost $101.17 million invested in 70 different holdings. Its portfolio primarily consists of domestic stocks, with a smaller portion of international stocks.

The Crofts are patient investors who will wait years for investment theses to develop. While this keeps the fund tax-efficient and turnover low, it can also cause the fund to stumble more than its peers when markets get rough. “When the market bottoms, Croft Value tends to hit even harder because the managers stand by their picks,” Morningstar Analyst Rob Wherry wrote in a recent article. Timber company Weyerhaeuser, which has been a fixture in the fund’s portfolio for nearly a decade, is an example of management’s conviction toward their picks. Croft admits the pick “hasn’t worked that well,” but says he still sees potential for the forest-products company, which recently converted into a real estate investment trust. “That makes them more tax efficient and they’ve implemented a dividend, which we think will increase over time,” Croft says.

Croft has also added to the fund’s position in home-improvement giant Lowe’s. “The company is basically the best in its class, but it’s been levered to the housing turnaround and economic turnaround,” Croft says. “With a gradual housing recovery over the next few years, their earnings power should be a lot greater than it has been in the past.” The fund has returned 23.66 percent over the past year and 11.61 percent over the past three years.

Over the long term, the fund has posted fairly consistent gains, staying in the black eight out of the past 10 years. As of the end of the first quarter, the fund's trailing returns landed it in the top 10 percent of Morningstar's large blend category over the one-, five-, and 10-year periods. The fund has returned 16.09 percent over the past five years and 8.63 percent over the past decade.

Investment Strategy

Management generally starts with about 1,000 investment ideas a year, generated from their in-house analysts, Wall Street, and industry experts. Then they whittle down the investable universe with deep research, studying metrics such as price-to-earnings and cash flow. The process yields a fairly compact portfolio of about 80 holdings, diversified among market caps with big names like Phillip Morris and Bank of America alongside virtual unknowns such as top holding Petrobank Energy and biotech company Quiagen.

Contrarian investing remains at the core of the Croft Value Fund. “When Wall Street and the herd mentality sort of give up on a stock or an industry, that immediately piques our interest,” Croft says. “We get a lot of good ideas that way.”  Management sticks to their picks even when the market sours, so investors should be prepared for few bumps as management’s investment theses develop. “We can certainly be early,” Croft says. “But we do have the fortitude that when we have a conviction on something we will hold it for years.”

Role in Portfolio

Morningstar calls this fund a “core” investment.


Gordon Croft and his sons Kent and Russell manage the fund. Gordon Croft founded Croft-Leominster in 1989 after working as a portfolio manager at T. Rowe Price for more than 20 years.


Croft Value Fund has an expense ratio of 1.04 percent.

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As with all stock funds, market fluctuations impact performance.

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