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U.S. News evaluated 108 Mid-Cap Value Funds. Our list highlights the top-rated funds for long-term investors based on the ratings of leading fund industry researchers.
Note: Profile written for different share class.
The fund has returned 30.05 percent over the past year, 16.80 percent over the past three years, 17.45 percent over the past five years, and ((UNHANDLED FORMAT TYPE: percents, NoneType for None)) over the past decade.
|Trailing Returns||Updated 10.31.2013|
|Year to date||25.8%|
|3 Years (Annualized)||16.8%|
|5 Years (Annualized)||17.4%|
|10 Years (Annualized)||N/A|
Some funds don’t shoot for the stars. Instead, they stay away from the valleys. That strategy sums up the American Century Mid-Cap Value fund.
As of November 05, 2013, the fund has assets totaling almost $4.74 billion invested in 127 different holdings. Its portfolio consists of stable mid- and large-cap U.S. stocks that offer low volatility.
“If there’s one line I could give you [about the stocks we look for], it’s high quality, low volatility,” said Portfolio Manager Kevin Toney. “We’re kind of the tortoise in the tortoise and the hare race. We just kind of plod along. We have a little less upside in up markets but much less downside in down markets. So over time, we feel our investors get a smoother ride.”
That was the case in 2008 when the fund lost 12 percent less than its peer average. When other mid-cap value funds rallied the following year to average gains of more than 33 percent, the fund tagged close behind with a 30 percent gain. The fund has returned 30.05 percent over the past year and 16.80 percent over the past three years.
Management says its investment strategy doesn’t change depending on the market. While management focuses on value plays, it doesn’t look for what Toney calls “deep value.”
“We’re looking for companies that are bent, not broken,” Toney says. “Like in 2008, when GM and Ford were kind of still around, we wouldn’t have been trying to pick between those two. We’d be looking at Toyota.”
The fund’s high turnover belies the fact that management buys and sells gradually. “We don’t make big portfolio changes. We’re incremental. As a stock outperforms, we sell it incrementally,” Toney says. Management focuses on mature companies with low volatility.
Management favors steady industrials like its top holding, waste management firm Republic Services. The fund will also veer toward larger firms than its mid-cap moniker implies, as the fund’s managers oversee two other American Century large-cap funds. The fund has returned 17.45 percent over the past five years. It opened in 2004.
Unlike the managers of other mid-cap value funds that search for unknown companies, American Century’s managers are looking for companies with well-known franchises, near-perfect balance sheets, and high cash flow. The managers wait for these companies’share prices to fall on what they consider “transitory” issues, such as “poor execution by management or a cyclical downturn,” and then they buy, Toney said. When a stock rebounds, management begins to sell incrementally. The focus on mature companies also hands investors a much higher gross yield than the fund’s benchmark, the Russell Midcap Value Index. The fund aims to beat the returns of the Russell Mid Cap Value Index.
Role in Portfolio
According to Morningstar, this fund plays a supporting role.
The fund is run by a team of six analysts and three portfolio managers—Keven Toney, Michael Sill, and Philip Davidson—who strive for consensus decision making. The team has largely stayed the same since the fund’s inception. The team, beginning with Philip Davidson as far back as 1993, has worked together since well before the fund’s inception. The team also manages the American Century Value Fund and the American Century Equity Income Fund.
American Century Investments Mid Cap Value Fund has an expense ratio of 0.80 percent.
The fund invests aggressively, which can negatively affect returns because of high transaction costs passed on to investors.