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The Big Picture For The Week Of July 6, 2008

Roger Nusbaum — Sat, 05 Jul 2008 15:11:00 +0000

No video this week. We have guests and other dogs with us for the holiday.

The chart is YTD for the Legg Mason Value Trust (LMVTX) versus the S&P 500.

You know the fund for its very long streak of beating the S&P 500. A look at the stale holdings on Yahoo Finance shows that it makes what I think are big bets and sometimes big bets do not work out.

It has United Healthcare (UNH) which has a 4.45% weight after a 41% drop. The fund is overweight financials versus SPX and it has zero in energy. Zero?

This is a good example of how actively managed funds can be problematic. A contrarian might have guessed that after a long run of outperformance the fund would lag. That makes sense. But the issue that I see and have articulated before is that there is no way to do any forward looking analysis on an actively managed fund. This is because no one can know what the manager will do six months from now.

I always say that I don't go zero anything because that is a bigger bet then I am willing to make. LMVTX' zero weight to energy makes the point. Even an underweight to an energy ETF would have helped the performance numbers.

This is not to pick on the fund because it is a good bet that the fund will outperform at some point in the future but that the lag came at the worst possible time (into the the teeth of a bear market) is either bad luck or something else but either way it was bad timing.

Chad Brand – United Healthcare on Sale

Ted Gottsegen — Wed, 21 May 2008 04:50:14 +0000

WallStNewsletters.com Full Monte contributor Chad Brand, aka. the Peridot Capitalist wrote last week about a company the Masters have been keeping a watch on, UnitedHealth Group Inc. (NYSE:UNH). Besides Warren Buffett buying more shares the stock has rallied 7% in the past three days and it is still less than $3 from its 52-week low.

Election Worries Have Put HMO Stocks Like United On Sale

Chad Brand — Fri, 16 May 2008 14:14:00 +0000

Owning healthcare stocks in an election year, especially one in which universal healthcare has taken center stage on the Democratic agenda, is not surprisingly a wild ride. With less than six months to go until our country chooses its next president, n...