FPA CapitalFPPTX

Morningstar Rating

Fund Research and Analysis

by Christopher Davis

FPA Capital is a terrific fund, but it also requires a stronger stomach than one might imagine.

For a fund led by famously risk-averse investors, this fund has been surprisingly turbulent. Although it lost less than its mid-value peers in 2008, it still slumped 35%. Read more

Kudos

Long-term record is among the fund world's best.

Very experienced and talented management.

The fund will have new lead managers in 2010, but they're experienced, will employ the same strategy, and have been behind many of its successes in recent years.

Low expenses. Read more

Risks

The fund's lead manager is taking a one-year sabbatical beginning in January 2010.

Big cash stake could hurt in rising markets.

Highly concentrated portfolio. And the fund's large--and growing--energy stake makes the fund vulnerable to commodity price movements.

See-saw performance pattern sometimes has led to shareholder redemptions, forcing management to sell holdings at inopportune times.

Volatility is far above the category norm. Read more

Strategy

This fund employs a strict valuation discipline. Managers Bob Rodriguez, Rikard Ekstrand, and Dennis Bryan look for companies that are extremely cheap. They look for clean balance sheets, strong cash flows, and dominant market shares. Read more

Management

In early 2009, manager Bob Rodriguez announced that he'll be taking a one-year sabbatical beginning in January 2010. Upon his return, Rodriguez, who has been at the helm since the fund's 1984 inception, will assume assistant manager duties. Dennis Bryan and Rikard Ekstrand will become lead managers. Read more

Inside Scoop

Beaten-up, downtrodden stocks are this fund's bread and butter. Few stocks meet management's strict criteria, so the portfolio is highly concentrated. Asset-allocation purists, beware: The fund is willing to own bonds and often sports a considerable cash stake. Read more

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Over the Waterfall, But Still Going South
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