Life Without Apple Is Still Peachy for Some Fund Managers
But there are some maverick fund managers who, even with a large-cap mandate, haven't bought Apple, yet have done quite well without it.
Apple, now at $610 a share and with a market value of $568 billion, is the largest member of the S&P 500 , at 4.6% of the benchmark. Its outsized presence and performance pretty much makes it a mandatory holding for mid- to large-cap funds, but it's owned by a lot of other funds as well.
At the end of the first quarter, 4,877 funds had a stake in it, holding a combined 69% of Apple's shares.
And they're surely all thankful for its existence, as Apple shares are up 51% this year, versus the S&P 500's 11.3% gain. Over three years, Apple is up an annual average of 70%, more than three times that of the index.
But Dan Culloton, Morningstar's associate director of fund analysis, cites a handful of large-cap funds with top performances in the large-blend category, with nary an Apple in sight.
The $2.3 billion Mairs & Power Growth fund has returned 13% this year, putting it in the top 11% of large-blend funds in terms of performance, and it has a three-year annualized return of 19.3%, placing it in the top 23% of such funds.
Manager Bill Frels "takes a deliberate and methodical approach to investing," Morningstar says. "Frels buys steadily growing businesses that he believes are trading at reasonably cheap prices."
In addition, "the fund's turnover ratio rarely gets above 5%, while its typical peer's is roughly 50%," says Morningstar, and that's with a 46-stock portfolio. A 5% turnover means it takes 20 years for the fund to rotate out of all its holdings.
The $3 billion Oakmark Select fund, managed by revered fund manager Bill Nygren since 1996, and also a large blend fund, is up 14.8% this year, putting it in the top 3% of performers in its category. And it's up 23% annually over three years, making it a top 4% performer among its peers for that period.
Morningstar says its long-term "success owes to the deft execution of a sensible strategy," focused on a relatively tiny 20-stock portfolio that "has been vigorously scrubbed for fundamental health and business-value growth potential."
The $1.6 billion BBH Core Select "follows a similar playbook to Nygren's, using fundamental research to undercover higher-quality stocks trading at temporary discounts," Morningstar's Culloton said.