Dodge & Cox Stock Fund gained 14.3% annualized, versus 2.2% of S&P500 since June 30, 2000. These are excerpt from their shareholder letter: "The market provides us with the price of a stock each morning. Our fundamental research is focused on assessing a company’s cash flow and profit potential over the next three-to-five years relative to this stock price."
We ask ourselves: What is a reasonable expectation if all goes according to management’s plan? How does the competitive environment affect the company’s ability to reach its goals? What could go wrong? It is our job to develop an understanding of a company’s risks and opportunities, and then to determine the price at which we are willing to participate (on our shareholders’ behalf) as equity owners.
While most of our time and energy is spent on fundamental analysis, several important factors and assumptions influence our individual company research and the Fund’s portfolio structure.
The dynamism of the U.S. economy has provided an attractive environment for equity investors. Over the past 60 years, the U.S. economy has expanded on a “real” basis at a better than 2.5% rate, 67% of the time, and has contracted only 13% of the time. Over the past 50 years the S&P 500’s earnings have increased by a factor of 24, while its price has risen by a factor of 30. Over its 42 year history the Fund has benefited as well, returning 12.4% versus 10.5% for the S&P 500, on an annualized basis. While there is no guarantee that the economy will grow continuously, we remain optimistic about the long-term prospects for both earnings growth and equity returns.
Read the complete shareholder letter
We ask ourselves: What is a reasonable expectation if all goes according to management’s plan? How does the competitive environment affect the company’s ability to reach its goals? What could go wrong? It is our job to develop an understanding of a company’s risks and opportunities, and then to determine the price at which we are willing to participate (on our shareholders’ behalf) as equity owners.
While most of our time and energy is spent on fundamental analysis, several important factors and assumptions influence our individual company research and the Fund’s portfolio structure.
The dynamism of the U.S. economy has provided an attractive environment for equity investors. Over the past 60 years, the U.S. economy has expanded on a “real” basis at a better than 2.5% rate, 67% of the time, and has contracted only 13% of the time. Over the past 50 years the S&P 500’s earnings have increased by a factor of 24, while its price has risen by a factor of 30. Over its 42 year history the Fund has benefited as well, returning 12.4% versus 10.5% for the S&P 500, on an annualized basis. While there is no guarantee that the economy will grow continuously, we remain optimistic about the long-term prospects for both earnings growth and equity returns.
Read the complete shareholder letter
