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Jacob Wolinsky
Jacob Wolinsky
Articles  | Author's Website |

Gurus Charlie Dreifus, Bruce Berkowitz and Donald Yacktman Nominated for Morningstar’s Domestic Equity Fund Manager of the Decade

January 03, 2010 | About:

I am a big fan of Guru Charles Royce and the family of funds he oversees, the Royce Funds. The Royce Funds are a family of twenty funds devoted exclusively to small cap value investing. Nearly, all the funds have great long term records and have far outperformed the Russell 2000 index.

One of the Royce fund managers, Charlies Dreifus has been nominated by Morningstar.com for domestic equity fund manager of the decade. Dreifus and five other managers have been nominated including gurus Bruce Berkowitz and Donald Yacktman.

Here is a quote from roycefunds.com

Morningstar noted that the last decade “was a brutal time for equity investors. Not one, but two severe bear markets lasting roughly two years each decimated investment accounts. As we near the decade's end, broad equity market indexes show flat to negative returns for the entire 10-year stretch. Stringing together a good record in that environment was a challenge as markets flip-flopped between rewarding and punishing excessive risk-taking. Of all domestic-equity funds, for example, barely a third have positive 10-year returns.”

In contrast, the five nominees distinguished themselves. Each “excelled in this difficult environment by relying on their own blend of original research, making capital preservation a priority and sticking with their approaches in good times and bad.” Morningstar went on to describe Charlie’s approach as “inspired by the Ben Graham school of value investing” and praised his ability to avoid “big losses with his laserlike focus on balance sheets and valuations.”

Dreifus’s fund the Royce Special Equity Fund has returned 11.98% since January 1st 2000 versus a 3.51% return for the Russell 2000. Below is the performance of Dreifus’s fund since he started managing it in 1998.

4Q* YTD* 1YR 3YR
RYSEX 4.12% 28.38% 28.38% 2.63%
Russell 2000 3.87% 27.17% 27.17% -6.07%

5YR 10YR Since Incept
RYSEX 4.06% 12.02% 8.60%
Russell 2000 0.51% 3.51% 3.55%
Annual Operating Expenses


Inception Date: 5/1/1998

This is not the first time Morningstar has taken notice of Dreifus. Dreifus won the domestic stock fund manager of the year award for 2008. While the market lost 37% in 2008, Dreifus’s fund lost only 19%.

Dreifus’s fund focuses on companies with a market cap under 2.5 billion. He likes companies with high returns on capital and low leverage. Charles Dreifus does not have a concentrated portfolio. His top ten holdings make up only 24% of the portfolio. Dreifus does not necessarily look for a catalyst when searching for stocks; he states that he is willing to buy anything that is cheap even if it lacks a catalyst. Dreifus states that while there were more bargains in March 2009, he is still finding value in certain areas.

Top 10 Positions of Royce Special Equity Fund

As of Quarter-End 9/30/09

% of Net Assets (Subject to Change)

National Presto Industries 4.3%
Bio-Rad Laboratories Cl. A 2.9%
Hubbell Cl. B 2.6%
Lancaster Colony 2.4%
Lubrizol Corporation (The) 2.3%
Gymboree Corporation 2.3%
Park Electrochemical 2.2%
Atrion Corporation 1.8%
Thomas & Betts 1.7%
Watsco 1.6%
Top 10 as % of Total 24.1%

Morningstar will announce the winners in mid January. I wish good luck to Mr Dreifus and the other contenders. To read more about the fund and Mr Dreifus follow this link

Royce Funds

Disclosure: I am a shareholder in several Royce Mutual Funds, including the one run by Dreifus: The Royce Special Equity Fund

About the author:

Jacob Wolinsky
My investment ideas have been inspired by many of value investors including Benjamin Graham, Charles Royce, John Neff, Joel Greenblatt, Peter Lynch, Seth Klarman,Martin Whitman and Bruce Greenwald. .I live with my wife and daughter in Monsey, NY. I can be contacted jacobwolinsky(AT)gmail.com and my blog is www.valuewalk.com

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