Retail investors are returning to mutual funds. That's clear from flow data in recent months.
But shareholders have been slow to return to small-cap stock funds, says David Nicholas, manager of small-cap $322 million Nicholas Limited Edition .
"Small caps are seen as more volatile and risky," Nicholas said. "So more shareholders are returning to large-cap funds, especially those that have nice dividend yields."
Shareholder caution has helped his portfolio too. "We tend to focus on less speculative stocks," he said. "We have some with good dividend yield too."
Waddell & Reed (WDR) is one of those. The asset manager's dividend yield is 2.5%. The stock is up 45% in the past 12 months. Earnings per share rose 33% in each of the past two quarters.
"It has great cash flow," Nicholas said. "And as the market improves, their cash flow will improve."
Nicholas says it has room to grow. "People have been pulling money out of stocks for years," he said. "The reallocation back into stocks is just starting."
Diversification is another volatility control. The fund held 102 stocks as of Dec. 31.
The core of Nicholas' portfolio is what he calls high-quality stocks that have the potential to double, triple or quadruple within a few years.
Nicholas started his current stake in Generac (GNRC) about a year ago. Sales of its backup generators boomed 34% and 49% the past two years. Homeowners are buying to defend themselves against power outages. Builders are installing devices in more new homes.
Powering Up
Stock of the No. 1 maker of home generators fell beneath its 10-week line the day after the company announced a secondary offering of 10 million shares by CCMP Capital. It's remained in a 33-35 trading range the past eight weeks.
The fund opened a position in SodaStream (SODA) a few months ago.
The company started selling its at-home carbonated drink makers abroad. Now it is expanding in the U.S., where it is in about 1% of households vs. 50% in some European markets. "If they reach 50% in the U.S. they'll be huge winners," Nicholas said. He would be happy if SodaStream gets into 5% of U.S. homes.
The company has also signed deals with companies like Crystal Light and Kool-Aid.
Follow-up sales of syrup have higher margins than sales of carbonation systems. "They make more on later sales of consumables than on the initial device," Nicholas said.
As for the fund's dividend plays, REITs now make up 5% of the portfolio. Nicholas has seen a lot of attractive valuations in health care REITs.
He holds Sabra Health Care (SBRA), which owns and invests in long-term care facilities such as nursing homes and assisted living residences. Sabra is up 89% in the past 12 months. Its dividend yield is 4.5%.
The fund was up 9.97% this year going into Monday. Its small-cap growth rivals tracked by Morningstar Inc. averaged 10.49%. The S&P 500 was up 12.08%.
Over the past three years the fund's average annual gain was 13.48% vs. 11.78% for its peer group and 12.29% for the big-cap bogey.
The fund's 10.58% 2012 gain lagged 79% of its peers due mainly to a lack of any biotech names, which were hot, Nicholas says.
Source: http://news.investors.com/investing-mutual-funds/041513-651927-nicholas-fund-favors-safer-stocks.htm
brandon phillips summerfest summerfest fidel castro rick santorum ozzie guillen castro comments phish
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.