The stock market rebound reached the one-year mark late in the first quarter and the results have been impressive. Over the past year the S&P 500 returned 49.8% and foreign stocks as measured by the S&P Global (ex US) LargeMid Cap Index returned 61.8%. All four of the domestic Masters’ Select funds delivered returns materially higher than their index benchmarks for the 12 months ended 3/31/10 while International trailed its benchmark.
Performance quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the funds may be lower or higher than the performance quoted. CLICK HERE for the funds’ latest performance. Indexes are unmanaged, do not incur expenses, taxes or fees and cannot be invested in directly. Performance data quoted does not reflect the redemption fee. If reflected, total returns would be reduced.
Because of the improvement in the economy and the huge surge in the stock market, investors’ attitudes are much improved compared to a year ago. However, despite a strong 12 months, stocks are still down over the last ten years and three years, while barely up over five years (all based on the S&P 500).
Where do we go from here? From a big-picture standpoint we remain concerned that deleveraging and other after-effects of the financial crisis of 2008 may create headwinds to growth that are likely to last for several years, and valuations, based on most market level measures, are not indicating compelling value. However, from a bottom-up standpoint the story may be different. In that regard, we take great interest in the views and analysis we hear from the Masters’ Select sub-advisors. The feedback we get from most is that at a stock picking level they are still able to find good investments, and, since the Masters run concentrated portfolios they only need to find a few compelling opportunities in order to be successful.
One area of opportunity that appears particularly appealing to a number of the Masters is high quality businesses, which they don’t believe are priced at an adequate premium to the average business. As an example, Mason Hawkins’ firm, Southeastern Asset Management, very recently wrote that “…the corporate managements at our holdings are the best collective group of partners with whom we have co-invested. The competitive advantages of our companies have grown, and our management partners’ abilities have been demonstrated more clearly over the last eighteen months. In addition to superior qualitative characteristics, the quantitative attractiveness is equally strong. We believe the return opportunity that remains in our portfolios even following the appreciation over the last year is substantial.”
Hawkins' comments speak to another point. We are not hearing from our sub-advisors that relative valuations among stocks are narrow at present. That could be a positive, because when valuations show more disparity it suggests better stock-picking opportunities may exist. In contrast, in the mid-2000s we were hearing from our managers that the valuation landscape was quite homogeneous, and that was a generally difficult period for active management, including several of our funds.
We thank you for your continued confidence in Masters’ Select and we continue to invest alongside you with an aggregate investment by Litman/Gregory partners, employees and Masters’ Select trustees of $11.9 million.
Sincerely,
Ken Gregory and Jeremy DeGroot
Litman/Gregory Fund Advisors, LLC
Advisor to the Masters' Select Funds
Mutual fund investing involves risk. Principal loss is possible.
Past performance is no guarantee of future results.
The views herein are those of Litman/Gregory Fund Advisors, LLC at the time the material is written and may not be reflective of current conditions.
Litman/Gregory Fund Advisors, LLC has ultimate responsibility for the performance of the Master's Select Funds due to its responsibility to oversee the Funds' Investment managers and recommend their hiring, termination and replacement.
Each of the funds may invest in foreign securities. Investing in foreign securities exposes investors to economic, political and market risks and fluctuations in foreign currencies. The Master's Select International Fund will invest in emerging market countries, which involve additional risks such as government dependence on a few industries or resources, government-imposed taxes on foreign investment or limits on the removal of capital from a country, unstable government, and volatile markets. Each of the funds may invest in the securities of small companies. Small-company investing subjects investors to additional risks, including security price volatility and less liquidity than investing in larger companies. Masters' Select Focused Opportunities Fund & Masters' Select Value Fund are non-diversified funds, which means that they may concentrate more assets in fewer individual holdings than diversified funds. Though primarily equity funds, they may invest a portion of their assets in securities of distressed companies. Debt obligations of distressed companies typically are unrated, lower rated, in default or close to default and may become worthless.
Some of the comments are based on current management expectation and are considered “forward-looking statements”. Actual future results, however, may prove to be different from our expectations. You can identify forward-looking statement by words such as “estimate”, “may”, “expect”, “should”, “could”, “believe”, “plan”, and similar terms. We cannot promise future returns and our opinions are a reflection of our best judgment at the time this report is compiled.
Opinions expressed are subject to change, are not guaranteed and should not be considered recommendations to buy or sell any security.
References to other mutual funds should not be interpreted as an offer of these securities.
Masters' Select Funds are distributed by Quasar Distributor, LLC.
Prospectus | Important Legal Disclosures | Mutual fund investing involves risk. Principal loss is possible.The Masters’ Select Funds are distributed by Quasar Distributors, LLC.
