Selected American Shares (SLASX)

Our search for the top no loan mutual funds continue with Selected American Shares (SLASX).

The age old motto of investing has been “Buy low, Sell high.” This makes absolute sense when you think hard about it. Getting something cheap and selling it for a higher price is a sure way to make profits. Christopher Davis and Kenneth Feinberg, the co-managers of Selected American Shares (SLASX) understand this concept fully and are using it today to create long-term profits. Many people are afraid to invest in the stock market now because of the dramatic drop in value that many stocks have seen, but Davis puts this in perspective by stating that “lower prices today will create higher returns in the future.”

Sticking with, and possibly purchasing more stocks of companies that are temporarily falling in value can be stressful at times. Over the past 12 months Selected American Shares has dropped 39%, or two percentage points more than the Standard & Poor’s 500-stock index. As on February 6th, the fund has already lost 6.4%, trailing the S&P 500 by almost three percentage points. In the last five years the fund is down 4.1% per year, falling 0.6 percent per year behind the S&P 500 index.

Looking at these numbers can scare an investor, but it is important to note that Selected American Shares (SLASX) has the objective of long-term profits. In the investment world five years is not a long time. Over the past ten years the fund has provided completely flat results, which in fact beats the S&P 500 by 2.7% per year, placing it in the Morningstar’s top 17% of large-cap blended funds.

A scaled down version of Selected American Shares (SLASX) is the Clipper Fund (CFIMX). The Clipper Fund holds stock in fewer companies than Selected American Shares (SLASX), 24 compared to 103, and therefore sees greater fluctuations in value. Recently most of this fluctuation as been downward, but the potential for a long-term rebound is even greater.

So far Selected American Shares (SLASX) worst performer has been American International Group (AIG). The shares price has plummeted from close to $60 to practically zero. Another significant loser held by the fund has been Bank of America.

Currently, Selected American Shares (SLASX) is buying companies with balance sheets that are strong enough to whether these hard economic times and will have the ability to increase prices when inflation picks up as expected. Some of Select American Shares (SLASX) includes Hewlett-Packard (HPQ), Schering-Plough (SGP), Microsoft (MSFT), Proctor & Gamble (PG) and Johnson & Johnson (JNJ). The fund managers consider these to be defensive stocks that are expected to perform better than cash.

Selected American Shares (SLASX) is also optimistic about established companies that have large amounts of ready cash. The managers figure that these companies are in a position to buy back their own shares or possibly acquire rivals in their industries.

Selected American Shares (SLASX) is heavily invested in the Financial Services sector, which accounts for 30% of the funds portfolio. Co-manager Christopher Davis says banking "is probably the second-oldest profession. There has never been less competition in the banking industry, or more universal disdain for the financial industry." Some of Davis’ favorite companies include American Express (AXP), Goldman Sachs (GS), and Wells Fargo (WFG).

Selected American Shares (SLASX) still remains one of the top large-cap, no-load mutual funds that you can buy, even considering its terrible short-term returns. The managers of the fund are great at finding strong companies at great values and buying their stock at low prices. The stocks that they buy are held for long periods of time. They hold the average stock in their portfolio for 12 years, creating just an eight percent turnover rate.

The low turnover rate of Selected American Shares (SLASX) helps keep expenses relatively low. If you buy the fund through online brokers you can expect an expense ratio of 0.88%. There is a share class available directly from the company (SLADX) shows an expense ratio of just 0.57%. By calling 1-800-243-1575 you can purchase the direct shares of Selected American Shares (SLADX).