rex wrote:i think the fact that it has 73% in cash is intriguing - maybe just set up to exploit the swings in the market (just playing devil's advocate here). The other thing that caught my attention is that it dropped just 9.96% in 2008 while most mutual funds including a S&P index dropped 37%.
I'm glad you asked!
With 73% cash and only 6 stock holdings
, it sounds like they're making big
macro and micro bets. Risk eventually shows up. Even if they've made the right calls now and in the past, are you or I really going to know it and stay the course when it eventually appears that the strategy blew up in their faces? Perhaps this time it'll be that holding cash (which I'll assume they did just before the crash) will be their downfall, that is, the world doesn't end (again) in the near-enough future. Or, maybe they'll be right.
John Bogle (and I'm sure others) have adroitly pointed out that most active managers hold too much cash when they should be in the market, and too much market when they should be in cash (that is, if one is to really benefit from timing markets). It overwhelmingly works against their returns. I don't have the stats, but they can be found in his books.
And roughly 2.81% in costs
(1.81% ER + 113% turnover) is uber-difficult to overcome. I suppose there are some funds, like salmon, who can swim against such a current. But ultimately, salmon do so at the cost of their own lives.
They're mostly a small cap (value?) fund with probably one Mid Cap company a couple Lg Caps (and all that cash!), so throw S&P 500 comparisons out the window...until they're exciting outperformance attracts so many new investors that they're AUM forces them into nothing but Large Caps (like, say, Fidelity Contrafund?).
It's true that I am only seeing what I want to see here (a factor in most cases where one finds a "magic" fund). I'll admit that unlike the OP, I'm looking at/for arguments in favor of the fund, but I have a firm investment philosophy that keeps me from getting too distracted by the latest and greatest. My total return plan benefits from principles that should benefit from Lg, Mid, Sm and Cash, but not of it will play out so dramatically because it's a matter of staying the course with a strategic asset allocation. Total return/strategic asset allocation with the use of index funds and staying the course ensures that my risk isn't so concentrated and erratic. The benefits of the outperforming asset classes distill profit into the remaining areas when-and-if they outperform. I am roughly in control of what level of risk I assume, and my portfolio builds itself from my savings and a process of a total return strategy.
Here's how Oceanstone (OSFDX)
did compared to VG Sm Cap Index Fund (NAESX)
since the crash:
If the market tanks soon, OSFDX will look great. If it doesn't, OSFDX won't.