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This Gold-Rated Fund Follows Its Rules

Laser focus has led to high performance for Gold-rated FMI Common Stock.


Alec Lucas: Gold-rated FMI Common Stock is an outstanding contrarian, yet cautious, option for small- and mid-cap exposure. 

Led by CIO and longest-tenured manager Patrick English and research director Jonathan Bloom, FMI’s stable 10-person management team runs this fund with a collaborative, high-conviction approach. It is focused on profitable companies with market caps below $5 billion at purchase and aims to buy them when they are trading at bargain prices; that often comes amid controversy or uncertainty. For example, the managers bought property and casualty insurer WR Berkley in late 2009 when the market was still suspicious of financials stocks. Its market cap has since more than doubled to $10 billion. FMI keeps tabs on liquidity in the fund's 40- to 50-stock portfolio and doesn't hesitate to close it to new investors to preserve flexibility. The portfolio doesn’t look like the Russell 2000 Index in terms of its sector exposures or in other respects nor does it behave like that index. It has, however, consistently lost less than the index in stress periods, including late 2018’s near bear market. That’s led to index- and peer-beating results over the long term.

Alec Lucas has a position in the following securities mentioned above: FMIMX. Find out about Morningstar’s editorial policies.