4 / 5 Stars
4 4 5 3 4
Zacks Investment Research
5 (Strong Sell)
Standard & Poor's
3 / 5 Stars
#90 in Mid-Cap Growth
U.S. News evaluated 221 Mid-Cap Growth Funds. Our list highlights the top-rated funds for long-term investors based on the ratings of leading fund industry researchers.
The fund has returned 20.94 percent over the past year, 11.98 percent over the past three years, 20.66 percent over the past five years, and 10.45 percent over the past decade.
|Trailing Returns||Updated 03.31.2014|
|Year to date||1.6%|
|3 Years (Annualized)||12.0%|
|5 Years (Annualized)||20.7%|
|10 Years (Annualized)||10.4%|
Westport Fund manager Ed Nicklin doesn’t shy away from slightly dinged-up companies. In fact, it’s one of the things he looks for when scouring the marketplace for undervalued firms poised for recovery and growth. While it might take a couple of years for his theses to develop, more often than not his bets pay off, according to Morningstar.
As of April 22, 2014, the fund has assets totaling almost $667.68 million invested in 51 different holdings. Its portfolio primarily consists of stocks of mid-cap companies in the United States.
In general, Nicklin favors companies with strong fundamentals facing what he believes are temporary issues depressing the stock price. His recent purchase of Beckman Coulter (a company that supplies testing materials to hospitals) is a prime example of that investment approach. Beckman Coulter’s stock took a hit in 2009 after disappointing earnings and questions about the quality of its testing instruments arose. While these challenges put a cloud over the company, Nicklin says “it was not a company-killer” and he had confidence that Beckman Coulter’s management would make the necessary changes for the company to rebound. “The key was that we were getting this company at a level that was attractive,” Nicklin says. “I could afford to wait. If it turned out as expected my rate of return over the entire time period would be acceptable.” The fund has returned 20.94 percent over the past year and 11.98 percent over the past three years.
The fund tends to lag more aggressive rivals in the most heated markets (such as 2003 and 2009) but still puts up solid returns. As of the end of the first quarter, its trailing 10-year returns landed it in the top 13 percent of Morningstar's mid-cap blend category. The fund has returned 20.66 percent over the past five years and 10.45 percent over the past decade.
Nicklin identifies undervalued or out-of-favor businesses that have some perceived catalyst Nicklin thinks will eventually close the gap in valuation. “We’re looking for an agent of change,” he says. “We’re looking for something that is likely to cause the undervaluation to disappear over a reasonable time period.” He’s a fairly patient investor and gives his picks about two years to develop. He’ll hold onto names for even longer if he sees additional value in owning the stock. That longer-term horizon results in lower turnover and more tax-efficiency for investors, Nicklin says. However, if the improvement he expects from a pick doesn’t occur at a reasonable pace, he will exit the position before the two-year window and move the assets elsewhere.
Role in Portfolio
Although it’s versatile, Morningstar says the fund’s focus on small- and mid-cap companies means that it’s best used as a supporting player for a diversified portfolio.
Ed Nicklin, who has been managing money at Westport since 1997, runs the fund. He also manages Westport’s Select Cap Fund with Andy Knuth.
Westport Fund has an expense ratio of 1.23 percent.
The fund’s concentrated portfolio might make it more vulnerable to market volatility.