Primecap

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ox13uh
Posts: 22
Joined: Sun Dec 05, 2010 2:36 pm

Primecap

Post by ox13uh »

Given Primecap's holdings in airlines, along with Buffett's sale, I'm wondering how Primecap investors here are responding. I've held this fund for 15+ plus years, and I was not concerned through the great recession. I'm inclined to hold through this as well, but it would be interesting to hear others' thoughts.

I know most Bogleheads reject active management. I understand the reasons, and I'm not looking to start an argument here about that. I'm mainly interested in whether Primecap investors are deciding, like Buffett, to cut their losses and invest in other funds.

https://www.forbes.com/sites/jeremyboga ... c109725dcd
SpicyUnagi
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Joined: Wed Oct 23, 2013 2:54 pm

Re: Primecap

Post by SpicyUnagi »

I'm still holding POGRX; I haven't sold out. Bought in around ~July 2017. Only active fund I have. I had Vanguard Primecap shares in my 401k, until they moved to index funds only via share changes, and couldn't transfer in kind to my personal account. Been running 75% SP500 + 25% POGRX as "Large Cap Holdings".

In addition, I only have this fund in an IRA, never in a brokerage account, unless you want the tax man coming after you.
Last edited by SpicyUnagi on Mon May 04, 2020 10:26 am, edited 1 time in total.
metalworking
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Re: Primecap

Post by metalworking »

Could be worse, you could be in primecap core like i am. Mine are all old investments that i have been trying to dump since i started realizing the long term capital gains the fund puts off many years are very high. Finally dumped some of my shares during the march plunge. With the market coming back I have been unable to dump more of my shares without tax implications. Interestingly the anticipated year end distributions increased in march despite the market plunge. I can't get out of this fund fast enough for my liking. Looks like the anticipated year end distributions for your fund are pretty high already as well (at least for now)
GFD45
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Re: Primecap

Post by GFD45 »

ox13uh wrote: Mon May 04, 2020 9:59 am Given Primecap's holdings in airlines, along with Buffett's sale, I'm wondering how Primecap investors here are responding. I've held this fund for 15+ plus years, and I was not concerned through the great recession. I'm inclined to hold through this as well, but it would be interesting to hear others' thoughts.

I know most Bogleheads reject active management. I understand the reasons, and I'm not looking to start an argument here about that. I'm mainly interested in whether Primecap investors are deciding, like Buffett, to cut their losses and invest in other funds.

https://www.forbes.com/sites/jeremyboga ... c109725dcd
I follow this fund and the Capital Opportunity very closely. I can give you some specifics. As of last quarter, 03/31/20, Primecap sold only 4.16% of their Southwest shares. Sold off Airbus 52%. Sold United only 1.22%. Sold American 1.10%. Bought Delta 6.46%. Sold Alaska Air 1.75%. Dumped Boeing 91.59%. The most interesting play.........added General Dynamics 47.11%. Maybe they think smaller private planes are the future. ???
tibbitts
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Re: Primecap

Post by tibbitts »

GFD45 wrote: Mon May 04, 2020 11:20 am
ox13uh wrote: Mon May 04, 2020 9:59 am Given Primecap's holdings in airlines, along with Buffett's sale, I'm wondering how Primecap investors here are responding. I've held this fund for 15+ plus years, and I was not concerned through the great recession. I'm inclined to hold through this as well, but it would be interesting to hear others' thoughts.

I know most Bogleheads reject active management. I understand the reasons, and I'm not looking to start an argument here about that. I'm mainly interested in whether Primecap investors are deciding, like Buffett, to cut their losses and invest in other funds.

https://www.forbes.com/sites/jeremyboga ... c109725dcd
I follow this fund and the Capital Opportunity very closely. I can give you some specifics. As of last quarter, 03/31/20, Primecap sold only 4.16% of their Southwest shares. Sold off Airbus 52%. Sold United only 1.22%. Sold American 1.10%. Bought Delta 6.46%. Sold Alaska Air 1.75%. Dumped Boeing 91.59%. The most interesting play.........added General Dynamics 47.11%. Maybe they think smaller private planes are the future. ???
Are you saying General Dynamics is a "small private plane" play?
Elysium
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Re: Primecap

Post by Elysium »

OP,

You purchased an active managed fund, presumably for the active stock selection skills of the manager, which you believed will deliver you above market returns. Are you no longer trusting the active manager to make the right decision regarding Airlines stocks, or any other stocks, and wish to make this decision yourself? If so, why did you buy the active fund in first place, you are better off in a broad market index fund where you don't need to make any decision. In other words, it's like you owning BRK shares and asking whether you should sell it because it was holding on to Airlines stocks, instead of letting Buffett make the choice. You either buy active fund for the manager to make decisions for you, or you just buy Total Market and forget it.
GFD45
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Re: Primecap

Post by GFD45 »

Speculation on my part. But that was my initial thought when I saw this.
sport
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Re: Primecap

Post by sport »

metalworking wrote: Mon May 04, 2020 10:20 am Could be worse, you could be in primecap core like i am. Mine are all old investments that i have been trying to dump since i started realizing the long term capital gains the fund puts off many years are very high. Finally dumped some of my shares during the march plunge. With the market coming back I have been unable to dump more of my shares without tax implications. Interestingly the anticipated year end distributions increased in march despite the market plunge. I can't get out of this fund fast enough for my liking. Looks like the anticipated year end distributions for your fund are pretty high already as well (at least for now)
I have held Primecap fund for many years. Due to the large distributions, I hold it only in IRA accounts.
Topic Author
ox13uh
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Joined: Sun Dec 05, 2010 2:36 pm

Re: Primecap

Post by ox13uh »

Thanks, GFD45, that's helpful. In response to Elysium, I basically agree with your framing of the choice, and my position answers your question about trust. I'm just curious what other Primecap investors (many of whom are still otherwise Bogleheads in terms of their investing philosophies) are thinking at the moment. I'm sure others have been asking this question about BRK as well, but Primecap is quieter and tends not to receive the same level of attention.
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Kenkat
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Re: Primecap

Post by Kenkat »

I’ve held Primecap since 1998 in a rollover IRA. I plan on continuing to hold it. It is the nature of an active fund to occasionally underperform the index. It is still a relatively low cost and low turnover fund and has performed well over the long haul. It does occasionally invest in stocks that are “out of favor” which is fine by me but does require patience.
sport
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Re: Primecap

Post by sport »

Kenkat wrote: Mon May 04, 2020 12:13 pm I’ve held Primecap since 1998 in a rollover IRA. I plan on continuing to hold it. It is the nature of an active fund to occasionally underperform the index. It is still a relatively low cost and low turnover fund and has performed well over the long haul. It does occasionally invest in stocks that are “out of favor” which is fine by me but does require patience.
Kenkat, you have stated my position exactly. Thanks for saying it better than I would. :beer
80125
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Re: Primecap

Post by 80125 »

ox13uh wrote: Mon May 04, 2020 9:59 am"...wondering how Primecap investors...are responding...held this fund for 15+ plus years,...would be interesting to hear others' thoughts...active management...
Currently ~6% of my overall portfolio, have held longer than you in a rIRA and have done nothing but occasionally scrape gains over the years (did the same with Cap Opp thru 2017 then exited that fund by plan). No illusions this is the "same fund/players as pre 2000" but I remain committed and for the first time in years, I'm buying through Sept 2020.

"Large cap growth, primarily US domestic, active mgt, higher ER, concentrated & minimal holdings (risk)...its everything nobody likes...I'm good."
--cbu
retired@50
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Re: Primecap

Post by retired@50 »

I hold VPMAX - PRIMECAP Admiral shares in my Roth IRA.

No intention of selling, and I'll re-invest any dividends and capital gains distributions I receive.

Regards,
This is one person's opinion. Nothing more.
azanon
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Re: Primecap

Post by azanon »

I've been with Vanguard a long time, and have never been able/allowed to get PRIMECAP anything.
02nz
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Re: Primecap

Post by 02nz »

azanon wrote: Mon May 04, 2020 1:56 pm I've been with Vanguard a long time, and have never been able/allowed to get PRIMECAP anything.
All three of the Vanguard funds (PRIMECAP, PRIMECAP Core, and Capital Opportunity) were open for a time around the Great Recession. I believe Flagship status will still get you into one or more of them even without existing holdings.

Two of the three Odyssey funds (also managed by PRIMECAP but not in the Vanguard family) are open to new investors.
azanon
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Re: Primecap

Post by azanon »

02nz wrote: Mon May 04, 2020 2:07 pm
azanon wrote: Mon May 04, 2020 1:56 pm I've been with Vanguard a long time, and have never been able/allowed to get PRIMECAP anything.
All three of the Vanguard funds (PRIMECAP, PRIMECAP Core, and Capital Opportunity) were open for a time around the Great Recession. I believe Flagship status will still get you into one or more of them even without existing holdings.

Two of the three Odyssey funds (also managed by PRIMECAP but not in the Vanguard family) are open to new investors.
Ahh ok interesting. I was doing what I could to b&h during the great recession, so I was making a point to not even shop around for alternate funds but just rebalance as needed. So I guess that's the exact time I wouldn't have noticed.
HEDGEFUNDIE
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Re: Primecap

Post by HEDGEFUNDIE »

Kenkat wrote: Mon May 04, 2020 12:13 pm I’ve held Primecap since 1998 in a rollover IRA. I plan on continuing to hold it. It is the nature of an active fund to occasionally underperform the index. It is still a relatively low cost and low turnover fund and has performed well over the long haul. It does occasionally invest in stocks that are “out of favor” which is fine by me but does require patience.
I am also not selling my POAGX
dru808
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Re: Primecap

Post by dru808 »

Is there any way if you decide to sell, to sell me your primecap shares? Kidding.
63% US equity | 27% INTL equity | 10% US long bond index
tibbitts
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Re: Primecap

Post by tibbitts »

ox13uh wrote: Mon May 04, 2020 9:59 am Given Primecap's holdings in airlines, along with Buffett's sale, I'm wondering how Primecap investors here are responding. I've held this fund for 15+ plus years, and I was not concerned through the great recession. I'm inclined to hold through this as well, but it would be interesting to hear others' thoughts.

I know most Bogleheads reject active management. I understand the reasons, and I'm not looking to start an argument here about that. I'm mainly interested in whether Primecap investors are deciding, like Buffett, to cut their losses and invest in other funds.

https://www.forbes.com/sites/jeremyboga ... c109725dcd
I don't understand the premise of the question. About half of people seem to think Buffett's sales of airlines is a smart move, the other half thinks he's nuts. What does that have to do with any of the Primecap funds?
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celia
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Re: Primecap

Post by celia »

sport wrote: Mon May 04, 2020 11:30 am I have held Primecap fund for many years. Due to the large distributions, I hold it only in IRA accounts.
That is THE worst place to hold it, in my opinion. I've sold most of it in my taxable (because of the taxes) and am buying it in Roth instead.

The problem with tax-deferred, is that your future RMDs (and future taxes) will grow more than usual. And every dollar withdrawn will be taxed as ordinary income. At least in taxable, the qualified dividends and LT capital gains can be taxed lower than ordinary income! Maybe you would want to convert some of it if the market dips again.

Note my signature below.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
sport
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Re: Primecap

Post by sport »

celia wrote: Mon May 04, 2020 3:15 pm
sport wrote: Mon May 04, 2020 11:30 am I have held Primecap fund for many years. Due to the large distributions, I hold it only in IRA accounts.
That is THE worst place to hold it, in my opinion. I've sold most of it in my taxable (because of the taxes) and am buying it in Roth instead.

The problem with tax-deferred, is that your future RMDs (and future taxes) will grow more than usual. And every dollar withdrawn will be taxed as ordinary income. At least in taxable, the qualified dividends and LT capital gains can be taxed lower than ordinary income! Maybe you would want to convert some of it if the market dips again.

Note my signature below.
celia, I did not state what kind of IRA accounts. Roth is an IRA too. :happy
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celia
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Re: Primecap

Post by celia »

sport wrote: Mon May 04, 2020 3:26 pm celia, I did not state what kind of IRA accounts. Roth is an IRA too. :happy
Yes, I know you're pretty sharp, but this is useful for others to consider. It was not meant to be personal, at all.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
Elysium
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Re: Primecap

Post by Elysium »

ox13uh wrote: Mon May 04, 2020 12:02 pm Thanks, GFD45, that's helpful. In response to Elysium, I basically agree with your framing of the choice, and my position answers your question about trust. I'm just curious what other Primecap investors (many of whom are still otherwise Bogleheads in terms of their investing philosophies) are thinking at the moment. I'm sure others have been asking this question about BRK as well, but Primecap is quieter and tends not to receive the same level of attention.
A longtime back when I had done some regressions by hand (using ken french data and monthly fund data) on many active managed funds, Primecap was one of the very few that appeared to generate meaningful alpha. Although it is hard to say whether this has changed or will change in future, with managed funds there is no telling. But if you were betting on any active managed funds, then there cannot be many others than this one.

Today you can check the regression results on PV, as they made it available here: Fund Factor Regressions. There is a search at the bottom if you want to plugin specific fund symbols, and VPMCX shows annual alpha of 1.66%. Their other funds are showing no alpha, or negative alpha. IIRC this is significantly lower than what it used to be, back when I did it was in the 3% range. In general you want active manager to be showing significant alpha to have continued confidence. Either they have lost their main alpha generating fund managers, or this is a temporary thing. Anything is possible, time will tell.
sport
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Re: Primecap

Post by sport »

celia wrote: Mon May 04, 2020 3:57 pm
sport wrote: Mon May 04, 2020 3:26 pm celia, I did not state what kind of IRA accounts. Roth is an IRA too. :happy
Yes, I know you're pretty sharp, but this is useful for others to consider. It was not meant to be personal, at all.
celia,
Your comments raise an interesting question: Certainly holding an active fund in a traditional IRA exposes all gains and distributions to ordinary income tax rates. However, compared to a taxable account, IRA gains can compound for many years, even decades, with deferred taxes. So, it is not so clear as to which would be preferable, lower current tax rates, or deferred higher tax rates. Of course, that is probably impossible to calculate since it would depend on such variables as the number of years of deferral, stepped up cost basis, current tax brackets, tax brackets of heirs, and future tax rates. Certainly a Roth IRA would be best. However, Roth space may be too limited for what one wants to hold.

I once held an active fund in my taxable account that performed very well. The taxes ate me alive.
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ResearchMed
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Re: Primecap

Post by ResearchMed »

sport wrote: Mon May 04, 2020 4:24 pm
celia wrote: Mon May 04, 2020 3:57 pm
sport wrote: Mon May 04, 2020 3:26 pm celia, I did not state what kind of IRA accounts. Roth is an IRA too. :happy
Yes, I know you're pretty sharp, but this is useful for others to consider. It was not meant to be personal, at all.
celia,
Your comments raise an interesting question: Certainly holding an active fund in a traditional IRA exposes all gains and distributions to ordinary income tax rates. However, compared to a taxable account, IRA gains can compound for many years, even decades, with deferred taxes. So, it is not so clear as to which would be preferable, lower current tax rates, or deferred higher tax rates. Of course, that is probably impossible to calculate since it would depend on such variables as the number of years of deferral, stepped up cost basis, current tax brackets, tax brackets of heirs, and future tax rates. Certainly a Roth IRA would be best. However, Roth space may be too limited for what one wants to hold.

I once held an active fund in my taxable account that performed very well. The taxes ate me alive.
Also, "sure", IF there is just the "one dollar to one dollar" comparison.
However, one dollar in taxable was, in most cases, obtained from more than one dollar pre-tax, as the taxes would need to be removed.

So that "comparison" would make a bit more sense if it were something like "$1 in taxable" vs "$1.25 in tax-deferred".
With the tax-deferred, those "gains" would indeed be taxed a regular tax rates, and not as long term cap gains, as an example.
But there would be more "gains", because it would be of the larger base.
It's not such a simple comparison as "$1 in taxable" vs "$1 in tax-deferred" in practical terms, for any specific person.

RM
This signature is a placebo. You are in the control group.
like2read
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Re: Primecap

Post by like2read »

Have held Primecap since 1994, and plan to continue to do so.

Yes, I wish it was not currently under performing, but I choose to see it as temporary.

l2r
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