4 / 5 Stars
5 4 2 3 2
Zacks Investment Research
1 (Strong Buy)
Standard & Poor's
3 / 5 Stars
#30 in Small Blend
U.S. News evaluated 218 Small Blend 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 14.49 percent over the past year, 11.19 percent over the past three years, 10.15 percent over the past five years, and 11.21 percent over the past decade.
|Trailing Returns||Updated 04.30.2013|
|Year to date||12.8%|
|3 Years (Annualized)||11.2%|
|5 Years (Annualized)||10.1%|
|10 Years (Annualized)||11.2%|
The FMI Focus fund is a small- and mid-cap stock fund that uses both cheaper value stocks and more expensive growth stocks to create a diversified portfolio. After lagging its mid-cap and small-cap rivals during the middle part of the decade, the fund surpassed both from 2008 to 2010.
As of May 03, 2013, the fund has assets totaling almost $701.48 million invested in 88 different holdings. Its portfolio consists of about half small-cap and half mid-cap stock of companies primarily headquartered in the United States.
Management takes a bottom-up investing strategy, meaning it pays more attention to company fundamentals than market conditions. It zeroes in on catalysts for growth in the near-term of one to two years, its average holding period for stocks. “We invest in high-quality businesses, run by strong management teams, that have a defendable niche, have good growth prospects,” says lead manager Rick Lane, touting the fund’s five pillars of investing (no reference to Islam). “But the key to what we do is patience and discipline. We wait for our opportunities to buy the companies cheap.” The best example of that patience is when Lane bought Winnebago Industries, the RV maker, in the depths of the early 2009 market bottom. While other investors left the company for dead, believing its product too expensive for recessionary consumers, management saw that the company was gaining market share due to the bankruptcy of its competitors and producing the only new line of vehicles in its industry. Management believes it has plenty of room to run once the economy picks up. The fund has returned 14.49 percent over the past year and 11.19 percent over the past three years.
The fund’s managers aren’t only looking at the shorter term. “We’re looking out three [or] four years ahead of time, and we want to see earnings growth potential,” said co-manager Faraz Farzam. One way management does this is by playing longer-term trends through unlikely means. With the share price of online content providers like Netflix skyrocketing and similar businesses scrambling to join that market, the fund has recently added a large position in Ciena Corporation, a maker of the telecom equipment needed to provide increased Internet bandwidth to deal with the deluge of new online video content. “They bought Nortel Neworks’s optical communications division,” says Farzam. “For not much money, they were able to expand their company’s sales by 50 percent.” The fund has returned 10.15 percent over the past five years and 11.21 percent over the past decade.
The managers still have plenty of leeway to stray from small- and mid-cap benchmarks. Unlike its competitors during 2010, for instance, the fund largely stayed away from energy companies and financials. Management also stays “away from industries that are heavily regulated” or heavily dependent on a single commodity.
Role in Portfolio
Morningstar calls this fund a supporting player.
Broadview Advisors is the subadvisor for the fund. Previously managing the fund as an FMI employee, Rick Lane left in 2001 to form Broadview Advisors but continued managing the fund. He became lead manager of the firm in 2009 when he replaced longtime manager Glenn Primack, who because of health concerns. Lane was joined in early 2010 by co-managers Faraz Farzam, Aaron Garcia, and Richard Whiting. Each co-manager is responsible for two or three industries and act as analysts as well as managers. Investment decisions are driven by consensus, though. Management also has more than $5 million in personal investments in the fund.
FMI Focus Fund has an expense ratio of 1.26 percent.
The expense ratio for the fund is slightly higher than the average for other small-cap funds.