The MUTUALdecision Blog: Don't Try This At Home

Don't Try This At Home

Bill Byrnes — Wed, 21 Mar 2007 12:44:00 -0500

It seems like private equity funds are buying up the whole world. Two more deals were announced yesterday. Two banks announced they were discussing a merger, the day before. I’m grouping private equity buyouts and mergers & acquisitions in the same category because the results are the same for the investor who’s smart (lucky) enough to own the stock of the company being acquired. There’s usually a significant jump in price upon the announcement of a deal. How can you, the mutual fund investor, partake of this feeding frenzy? My first response is don’t try – it’s like looking for a needle in a haystack. And, I have to believe that the private equity bubble is soon to burst.

Having said that, if you’re curious as to how to get in on the “fun” here are some suggestions. You can buy a mid-cap value fund. Most buy-outs have occurred in the mid-cap arena and, presumably, among undervalued companies. You also could consider buying a sector fund in one of the industries where there has been more private equity or M&A activity. Retailing, REITs, and banks spring to mind. But remember, sector funds are riskier than broadly diversified value funds. Please see my posting titled Yellow Sub(prime)marine for a discussion of sector funds. Where can you find a list of top performing mid-cap value and sector funds? (This is a shameless commercial for our web site.) Try the MUTUALdecision Research Tool. By the way, if any of you know of a fund that specializes in buyouts or M&A, please let us know.

"Don't Try This At Home" by Bill O

Tue, 17 Apr 2007 02:04:19 -0500

No worries on the response time, I appreciate your comments. You framed my portfolio well and at this point, given our mutual concerns about the possibility of a recession, I'm comfortable with 40% equity exposure. Actually, given how well several of my stocks have done I've done some profit taking and am pushing into more international & emerging market funds. The site looks great BTW! -Bill-

"Don't Try This At Home" by Bill@MUTUALdecision

Fri, 30 Mar 2007 16:33:20 -0500

Bill O, Soirry for taking so long to get back to you. We've been busy making imporvemments to our website. You have a pretty conservative portfolio. I assume your mutual funds are invested in equities. If so, you have only a 40% exposure to the stock market. I wouldn't go any lower. You should look at the diversiifcation of your funds by type and, also, compare your funds to your stocks. For example, if you own a big cap fund but all your stocks are invested in big caps, ie, GM, AT&T, Microsoft, etc. you aren't diversified. Within your funds, a conservative approach is to hold a big cap value fund and, I suugest, an international fund. There are many good funds in each catageory. You can find the best performing on the MUTUALdecision website under Top Ten Funds or you can run our Research tool and make your own selections. Good luck!

"Don't Try This At Home" by Bill O

Sun, 25 Mar 2007 03:13:18 -0500

Bill, I just finished reading all of your blog posts (it's Saturday evening, 3/24) and I like the points you make. Given the converging forces of the "Yellow Sub(prime)marine" and current Middle Eastern instability are there funds that you feel might be safe harbors? My current portfolio is 50% municipal bonds for income, 10% cash, 15% mutual funds and 25% stocks. Thanks in advance, -Bill-