Core Values Reward Investors
A Wall Street aristocrat delivers steady results by investing in firms with loyal customers.
Think of Brown Brothers Harriman, a blueblood investment firm that dates back to 1818, and mutual funds don't come to mind. Yet the firm runs four of them, and one, BBH Core Select (symbol BBTEX), has been a top performer in recent years.
One reason for the good numbers is that the fund lost "only" 22% in 2008, outpacing Standard & Poor's 500-stock index by 15 percentage points. Michael Keller, who runs the fund with Timothy Hartch, says steady performance in rocky markets stems from the managers' focus on companies with strong balance sheets and vast and loyal customer bases. "We like companies that generate cash even in a downturn," says Keller.
Intuit and Costco are two big holdings that fit the mold. Intuit, which sells financial software, such as Quicken and TurboTax, collects money when customers buy its programs. Keller thinks Intuit will benefit as customers migrate from buying software in shrink-wrapped packages to purchasing it online. Costco, the warehouse retail giant, gets a steady stream of cash from the membership fees paid by more than 55 million loyal members; nearly 90% of Costco's customers in the U.S. and Canada renew each year. The shares of both Costco and Intuit have climbed over the past three years, even as the S&P 500 has lost value.
The fund, which recently held just 29 stocks, requires a $10,000 minimum if you invest directly with BBH. Some discount brokers will let you in for less.