Since full-year 2008 distributions haven't been announced yet, let's see how this played out last year in a fund that's front and center in the financial crisis. In the happy event your fund has realized some profits this year, selling before a distribution means you avoid having to pay taxes on money kept in the fund once the profits are disbursed to shareholders. If you're sheltering $10,000 in gains and are in the 30% tax bracket, you avoid paying $3,000 in taxes. There are several benefits in swapping out of funds. Simply put, the government allows you to avoid paying taxes on investment profits you've locked in this year - should you have any - and $3,000 of unearned income, up to the amount of your realized losses. If you're caught in a beaten-down fund, Uncle Sam grants you some solace via the tax shelter the IRS provides you when taking a loss. These funds are run by seasoned managers overseeing diversified portfolios. Two things are stunning about these name-brand losses: They far exceed the S&P 500's decline of 19.6%, and they aren't coming from funds that specialize in sectors that happen to be out of favor. Subscribe to Morningstar FundInvestor here.The fourth quarter is clean-up time for mutual-fund investors. Investors seeking a gutsy growth fund should take a look at this fund, better suited for tax-sheltered accounts. As a result of management's fast-trading style, the fund can hit shareholders with large capital gains distributions, which translate into hefty tax bills. This fund's 1.12% expense ratio is above average for no-load large-cap mutual funds. Despite its recent stumble, the fund's trailing five- and ten-year returns remain top notch. The success of the fund's strategy relies on consistent stock-picking, and D'Alonzo and his team have delivered over the long haul. The fund has tumbled 32% for the year to date through September 2008, a loss severe enough to place it in the category's bottom decile.īut we think investors have good reasons to stay the course. The team's decision to up its energy stake in the first half of 2008 has been costly as oil prices soon fell from peak levels, driving down the fund's energy picks. This fund's boldness may cause short-term pain for shareholders. The fund also did a good job limiting losses during the 2000-02 bear market, when it fell half as much on average per year than its peers and benchmark. The team sold the latter stock recently when it hit the team's price target. Management sidestepped the financials sector, where balance sheets lack transparency, and opted for energy and industrial companies such as Peabody Energy and Mosaic. While its typical large-growth peer and the Russell 1000 Growth Index lost 13.2% and 12.3% in the year ending July 14, 2008, the fund lost 4.6%. The fund not only participates in market up swings, but also limits losses in downturns. This disciplined approach has worked well under various market conditions. D'Alonzo buys companies trading at a forward price/earnings ratio of 25x or less and sells soon after they hit their price targets. The team looks for companies whose earnings are increasing rapidly (preferably in the 20% to 30% range annually). They focus on finding companies with near-term earnings growth that will likely exceed Wall Street analysts' expectations. A team of 31 analysts talks to companies' customers, suppliers, competitors, and industry experts. For starters, its process relies on heavy fundamental legwork, not fancy quantitative models. This isn't your typical momentum-driven fund. D'Alonzo has served as lead manager since December 1998, when founder and chairman Foster Friess stepped down from this role. Both D'Alonzo and fund family founder and chairman Foster Friess have substantial investments in all Brandywine funds. D'Alonzo and team also steer the fund's more famous sibling, Brandywine Fund (BRWIX). Russel Kinnel, editor of Morningstar FundInvestor, and analyst Wenli Tan like a descendant of a blue-blooded fund family.īrandywine Blue ( BLUEX) is backed by one of the most seasoned teams in the category, and its unique and disciplined approach has rewarded long-term shareholders.īill D'Alonzo, who is also the fund shop's chief executive officer, has been leading the team of analysts here since the fund's 1991 inception.
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