therailsplitter (99.31)

Stocks That Act Like Mutual Funds

June 03, 2009 – Comments (1) | RELATED TICKERS: BRK-A , FFH , ICFI

     The goal of this post is to point out a few stocks that one could buy and then not worry about them, for the most part, until retirement--- assuming you are still young now.  These stocks would be tantamount to a mutual fund, where you buy in and let the fund manager take care of the investment.  The "fund manager" in this case though would be the company owner.  

     The first of these is pretty much self-explantory.  This company is Bershire Hathaway.  This stock has averaged around 20% compounded annually over its life and is virtually self-sustaining.  With Buffett or not this company will run itself.  I would look into the future for returns of around 12-15% annually though, based on the simple fact that the company has grown to tremendous proportions already and cannot sustain such rapid growth.

     The second company is a little more obscure, however, it has been called the Canadian Berkshire--- for good reason.   The name: Fairfax Financial.  This company has average around 16% annually compounded over its life.  It is involved in the same type of business as Berkshire and it is run by management that is just as top-notch (although the wits of Buffett have yet to be matched by anyone).  This company also holds a similar philosophy: value orientation with a long-term approach to investing.  I would say that this company's average annual growth should increase slightly and would be surprised if it didn't top 16% annually compounded.

     The third company is buried in quicksand in comparison to the first two.   This company is ICF International.  I am recommending this as a buy-and-hold-and-forget, mutual-fund-like company, because of the management at this company.  It is a bit of a long-shot and a tough call on my part because of how new the stock is (a little over two years) but I have faith in this company.  According to Yahoo the company "provides management, technology, and policy consulting and implementation services to government, commercial, and international clients worldwide."  However, this doesn't spell out the diversity of this company as adequately as I would have liked.  This company is actually involved in climate change, defense, energy, environment, homeland security, social programs, health, and transportation.   These industries are stalworts as far as I am concerned, ne'er to change due to necessity.  This company has been around for 40 years, has relationships lasting from 10-36 years, has a backlog greater than its market cap, 42% of employees hold post-grad degree, and hold 80% of contracts with governmental agencies.  This is a company involved in an industry with a high barrier to entry and where its long-standing relationships mean a great deal.  The safety of this company is in its management, its industry diversification, and its guaranteed future growth (as evidenced by its large backlog).  Although this may seem like the "riskiest" pick of the three it also holds the most potential for future profitability.  

     Why waste your money on a mutual fund which entails giving money to a person you don't know for growth you cannot predict, all the while paying fees on your own money?  Take control and buy companies that act like mutual funds themselves.  Although I recommend the three above there are plenty more great companies out there that may be just as safe and the bonus is that you won't have to pay anyone any fees.  If there are those of you still considering a mutual fund as the best option please consider index funds first.  Then, if you still are thinking about mutual funds I recommend doing hours of research on whatever mutual fund you decide and try to think outside the box.  What I mean is, there are many mutual funds that are advertised and almost pushed on you.  Usually you are only offered a limited selection by your employer as well.  My advice is to find those that people aren't recommending, that you aren't pushed into, and that adhere to an investment philosophy similar to your own.  Recently I came upon Wietz Funds, it is the only mutual fund I recommend if you are opposed to my other ideas. 

Weitz Funds' web address is: http://www.weitzfunds.com/default.asp

Side note: I recommend opening a Roth IRA to invest in these companies and/or mutual funds.