This Mid-Blend Fund Seeks Diamonds in the Rough
Silver-rated First Eagle Fund of America has driven strong returns by rooting out companies with unrecognized potential.
Greg Carlson: This week's Morningstar Medalist is First Eagle Fund of America (FEAFX). This fund resides in Morningstar's mid-blend category. However, the overall portfolio tends to own a mix of mid- and large-cap stocks. The managers typically buy mid-cap stocks; however, a lot of their winners will blossom into large-cap territory, and they continue to hold on for the long haul as long as things work well. So, you might say that they start out as value investors but end up holding some stocks that are classified as growth stocks, such as Valeant Pharmaceuticals (VRX), for example, which is a biotech company.
They invest in companies that are undergoing corporate change. These typically are companies that have had management changes or some type of restructuring. They also look for companies that have some sort of hidden asset that hasn't been recognized by the market.
The management team has been quite stable over time. However, one of the two managers who have been on the fund for 25 years has stepped back in his role a bit--reduced his day-to-day management. In his place is a new comanager named in 2014, Eric Stone. He has only been at the firm for three years, but he has been familiar with the firm for over a decade, working for a former co-worker of theirs.
Long-term, risk-adjusted, and total returns have been very strong here. We think this is a solid holding, and it earns a Morningstar Analyst Rating of Silver.
Greg Carlson does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.