Follow the Leaders
A patented methodology helps this eight-year-old fund identify standouts in any industry.
Gerry Sullivan, 46, runs Industry Leaders, an undiscovered fund with just $25 million in assets, but a five-year annualized return of 10% -- better than that of the overall market. We asked him about his investing approach.
KIPLINGER'S: Why focus on industry leaders?
SULLIVAN: Leadership perpetuates leadership. Big companies remain big. They have the ability to do new business, to expand and to develop new products.
Sign up for Kiplinger’s Free E-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.
How is your index fund different? Here's an analogy: When my daughters were little, we went to the racetrack. They asked, "Why don't you bet on all the horses? Then you'd be sure to win." Well, if I bet in line with the odds on each horse, that would work the same as an S&P 500 index fund -- that's the market bet, not the best bet. If I knew what the owners bet on their horses, it would be like looking at what companies bet on themselves. They know their business better than the market does.
How do you find what they're betting? I look for common shareholders' equity. It's the closest thing to book value, or the net value of a company's assets, that you can capture with a computer program. It measures what investors put into a company and how much of its earnings the company keeps to put back in the business -- in effect, what the company is betting on itself. I also look for a credit rating of A or better to determine quality.
What do you end up with? Currently, we capture 55 industries, represented by 78 companies. We have no railroad, natural-gas or wireless-networking stocks, but we own two software companies and five financial-services stocks.
How has the mix changed lately? Most recently we put Paccar in the portfolio -- we hadn't had any auto or truck stocks in three or four years. Earlier this year, Deere replaced Caterpillar. Caterpillar had been in the fund since day one -- I had an emotional attachment to their yellow trucks. Now I look for green.
To continue reading this article
please register for free
This is different from signing in to your print subscription
Why am I seeing this? Find out more here
Anne Kates Smith brings Wall Street to Main Street, with decades of experience covering investments and personal finance for real people trying to navigate fast-changing markets, preserve financial security or plan for the future. She oversees the magazine's investing coverage, authors Kiplinger’s biannual stock-market outlooks and writes the "Your Mind and Your Money" column, a take on behavioral finance and how investors can get out of their own way. Smith began her journalism career as a writer and columnist for USA Today. Prior to joining Kiplinger, she was a senior editor at U.S. News & World Report and a contributing columnist for TheStreet. Smith is a graduate of St. John's College in Annapolis, Md., the third-oldest college in America.
-
Federal Reserve Meeting: Live Updates
Investors of all kinds are eagerly awaiting news from the Federal Reserve meeting. Here is live updates and commentary from Kiplinger experts.
By Dan Burrows Published
-
How Non-Traded REITs Could Give Your Roth IRA a Boost
In addition to increasing the diversity of your portfolio, adding a non-traded REIT within your Roth IRA allows the resulting dividends to grow tax-free.
By Edward E. Fernandez Published
-
Best Banks for High-Net-Worth Clients
wealth management Kiplinger's 2023 list of the best banks for higher-net-worth clients.
By Lisa Gerstner Published
-
Stock Market Holidays in 2024: NYSE, NASDAQ and Wall Street Holidays
Markets When are the stock market holidays? Take a look at which days the NYSE, Nasdaq and bond markets are off in 2024.
By Kyle Woodley Last updated
-
Stock Market Trading Hours: What Time Is the Stock Market Open Today?
Markets When does the market open? It's true the stock market does have regular hours, but trading doesn't necessarily stop when the major exchanges close.
By Michael DeSenne Last updated
-
Bogleheads Stay the Course
Bears and market volatility don’t scare these die-hard Vanguard investors.
By Kim Clark Published
-
I-Bond Rate Is 5.27% for Next Six Months
Investing for Income I-Bonds issued November 1, 2023 through April 30, 2024 will have a rate of 5.27%.
By David Muhlbaum Last updated
-
What Are I-Bonds?
savings bonds Inflation has made Series I savings bonds enormously popular with risk-averse investors. So how do they work?
By Lisa Gerstner Last updated
-
This New Sustainable ETF’s Pitch? Give Back Profits.
investing Newday’s ETF partners with UNICEF and other groups.
By Ellen Kennedy Published
-
As the Market Falls, New Retirees Need a Plan
retirement If you’re in the early stages of your retirement, you’re likely in a rough spot watching your portfolio shrink. We have some strategies to make the best of things.
By David Rodeck Published