Talk about a riddle wrapped inside an enigma. Oceanstone Fund (symbol OSFDX) has delivered awesome gains in recent years, but scant information exists about its close-lipped manager, James Wang, and his methods. And that apparently is by design.
Wang declined to speak with us for this article. Before we tell you what we do know about him, let's review those mind-boggling results. Over the past five years through April 17, Oceanstone returned 39.9% annualized, annihilating Standard & Poor's 500-stock index by an average of 39 percentage points per year. Starting in 2007, the fund's first full year of existence, and including 2012, Oceanstone has topped the index every year except last year, when its 1% return lagged the index by a mere percentage point.
Most of Oceanstone's great performance is due to two great quarters and one great year. The disastrous 2007-09 bear market ended on March 9, 2009, and stocks began to recover with a vengeance. The S&P 500 gained 16% in both the second and third quarter of that year. But Oceanstone blew away the index, soaring 134% in the second quarter and 54% in the third. Propelling performance were big positions in Dollar Thrifty (DTG), the car-rental company, which skyrocketed 1,103% in the second quarter, and Sonic Automotive (SAH), a car retailer, which jumped 535%. Oceanstone finished 2009 with a 264% gain, compared with 26% for the index.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
We know from the fund's prospectus and other records that Wang invests primarily in U.S. stocks and that he trades frequently and sometimes furiously. Oceanstone's portfolio turnover for the fiscal year that ended June 2011 was 146%. In previous years, turnover topped 400%, implying that Wang held stocks for less than three months, on average.
The prospectus says that Wang lives in Carlsbad, Ca. (just north of San Diego), and that he was a state-registered investment adviser from 2003 to 2006. During that time, the prospectus says, "he advised separately managed accounts in [the] U.S. stock market for individuals and small businesses."
Despite Oceanstone's amazing record, the fund holds only $23.4 million in assets. The most obvious explanation for Oceanstone's modest size is that it is not easy to buy. The fund, which requires a $2,000 minimum investment and does not levy sales charges, is not sold through brokers (online or otherwise). To invest, you have to obtain an application from the fund's Web site or its transfer agent (800-988-6290), fill it out and mail it. The fund's annual fees clock in at a pricey 1.80%.
Pam Tarczy, of Mutual Shareholder Services, the transfer agent, says it has never been Wang's "intention to grow a huge fund … so that it's unmanageable." She also says he attributes some of that spectacular 2009 return to luck, and that, ideally, he'd like to produce average returns of 15% a year. She also says he holds a PhD in biology (though Oceanstone held not a single health care stock at last report).
To add one more element to the mystery of Oceanstone, you can't pigeonhole Wang as someone who focuses on a particular segment of the stock market. Fund rater Morningstar labels Oceanstone as a small-company value fund, and it's likely that bargain-priced runts played a major role in Oceanstone's ascent. But as of December 31, according to Morningstar, 65% of the fund's stock holdings were in large and gigantic companies. After a 19% position in cash, Oceanstone's largest holdings were Bank of America (BAC), 11% of assets; Archer-Daniels Midland (ADM), 9%; Arrow Electronics (ARW), 8%; and General Motors (GM), 6%. All told, the fund held 18 stocks.
That Wang seeks to keep Oceanstone small and, therefore, easy to manage, is commendable. That will make it easier for a gunslinger like him to buy and sell stocks, especially when he trades shares of small companies, which can be illiquid. But without having the opportunity to speak with Wang and learn more about his philosophy and approach to stock picking, it's hard to endorse his fund. For now, Oceanstone is a mystery best left out of your portfolio.
ORDER NOW: Buy Kiplinger's Mutual Funds 2012 special issue for in-depth guidance on the only investments you need.
-
I'm want to give my 3 grandkids $5K each for Christmas.You're comfortably retired and want to give your grandkids a big Christmas check, but their parents are worried they might spend it all. We ask the pros for help.
-
If You're Not Doing Roth Conversions, You Need to Read ThisRoth conversions and other Roth strategies can be complex, but don't dismiss these tax planning tools outright. They could really work for you and your heirs.
-
Could Traditional Retirement Expectations Be Killing Us?A retirement psychologist makes the case: A fulfilling retirement begins with a blueprint for living, rather than simply the accumulation of a large nest egg.
-
The 5 Best Actively Managed Fidelity Funds to Buy and Holdmutual funds Sometimes it's best to leave the driving to the pros – and these actively managed Fidelity funds do just that, at low costs to boot.
-
The 12 Best Bear Market ETFs to Buy NowETFs Investors who are fearful about the more uncertainty in the new year can find plenty of protection among these bear market ETFs.
-
Don't Give Up on the Eurozonemutual funds As Europe’s economy (and stock markets) wobble, Janus Henderson European Focus Fund (HFETX) keeps its footing with a focus on large Europe-based multinationals.
-
Vanguard Global ESG Select Stock Profits from ESG Leadersmutual funds Vanguard Global ESG Select Stock (VEIGX) favors firms with high standards for their businesses.
-
Kip ETF 20: What's In, What's Out and WhyKip ETF 20 The broad market has taken a major hit so far in 2022, sparking some tactical changes to Kiplinger's lineup of the best low-cost ETFs.
-
ETFs Are Now Mainstream. Here's Why They're So Appealing.Investing for Income ETFs offer investors broad diversification to their portfolios and at low costs to boot.
-
Do You Have Gun Stocks in Your Funds?ESG Investors looking to make changes amid gun violence can easily divest from gun stocks ... though it's trickier if they own them through funds.
-
How to Choose a Mutual Fundmutual funds Investors wanting to build a portfolio will have no shortage of mutual funds at their disposal. And that's one of the biggest problems in choosing just one or two.
