Marrying Value with Momentum

This fund looks for cheap stocks with rising prices.

At first glance, American Beacon Bridgeway Large Cap Value (symbol BWLIX) looks like most big-company value funds. Using a variety of screens, the managers seek stocks that trade at low price-earnings and price-to-sales ratios, among other value measures. But they also add a filter for quality (firms with little debt, for instance) and one for momentum (stocks that have risen sharply in recent months). The extra layers help to "smooth out the ride," says lead manager John Montgomery.

So far, the approach has worked, helping the managers achieve their goal of beating the Russell 1000 Value index, a measure of undervalued large-company stocks. Although the no-load, low-minimum version of the fund has been around only since early 2012, an older share class of the fund, which was established in October 2003 and has the symbol BRLVX, returned an annualized 6.0% over the past five years. That outpaced the Russell index by an average of 2.1 percentage points per year. Plus, the fund was a tad less volatile than the index over that period (returns and related data are through May 3).

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Kaitlin Pitsker
Associate Editor, Kiplinger's Personal Finance
Pitsker joined Kiplinger in the summer of 2012. Previously, she interned at the Post-Standard newspaper in Syracuse, N.Y., and with Chronogram magazine in Kingston, N.Y. She holds a BS in magazine journalism from Syracuse University's S.I. Newhouse School of Public Communications.