CGM Focus Fund: My New Performance Leader
For quite some time, Dodge & Cox International Fund (DODFX) was the top performer in our mutual fund investments. Less than two months ago, our investments in the fund have returned more than 100%. However, the market downturn since then has eroded some of the gains. Now the overall return of this fund is down to 88%.
Then a new leader has quietly emerged recently and it’s CGM Focus Fund (CGMFX), a fund that once I was considering cut loss due to its high turnover ratio (300% in 2006). I am glad I didn’t 
The following is a chart comparing YTD return of CGMFX against S&P 500, which speaks for itself. As of September 27th, S&P gained 9.46% while CGMFX returned 61.57%!
So what’s behind the fund’s astonishing run this year? According to a news report on Bloomberg.com, CGMFX
has more than two-thirds of the fund in energy, commodities and mining companies, three of the 10 best industry groups in the S&P 500. The fund has risen 59 percent this year, driven by Potash Corp. of Saskatchewan Inc. in Saskatoon, Saskatchewan, the world’s biggest maker of fertilizer, and Houston-based oil-services company Schlumberger Ltd. Shares of Potash have more than doubled this year and Schlumberger has surged 67 percent.
From the fund’s semi-annual report, CGMFX investments include
- Oil service: 19.4%
- Metals and mining: 12.8%
- Oil – Independent production: 9.2%
- Offshore drilling: 4.5%
Among the fund’s top 25 holdings, 7 of them have gained more than 100% so far this year and 10 have returned more than 50%.
No wonder it can perform so well.
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CGM Focus is a great fund with a great manager, but
when you invest you must be prepared for rapid turnover
and dizzying volatility. If you can successfully deal with these two issue (most invester can’t) this fund
is a winner.
Sun,
When I compare CGMFX,DODFX, with my FSEAX, I can see where DOD went wrong: August. The fund manager must have made some poor moves that month, perhaps moved by the whole credit crunch brouhaha. I stayed in FSEAX and have realized a 60% gain since I entered some months ago.
M
Actually, I don’t feel D&C would make any dramatic change in their investment just because of the fluctuation in one month. If you look at the historical returns of the fund, the third quarter was always the weakest, but the forth was much stronger. Let’s see how the fund will perform in the last three months of the year.