Value Fund

Mutual funds hoping to build investor loyalty often have used the stick, but seldom the carrot.Redemption fees and other penalties to discourage fund switching and short-term investing are common. But rarely does a fund sponsor go beyond boilerplate shareholder reports and try to make fund investors feel as though they are a part of the investment process.A peek at a typical prospectus or semiannual report is a singularly uninviting experience. Most fund World Wide Web sites are not much better.

Firsthand Technology Value Fund is on top of the world, but an impending change in managers could loosen the ground beneath its feet. Firsthand recently disclosed that Ken Kam -- half of the duo that has propelled this fund to earth-shattering returns -- will be leaving the firm in October to start his own shop. (Co-manager Kevin Landis will continue to guide the fund.)Talk about going out on a high note: Only a few months past its fifth birthday, this offering sports the best five-year return in the Morningstar database.

Are American investors, particularly aging baby boomers, tiring of the stock market's rock 'n' roll?Could it be they're ready to add a slow, steady waltz or two to their investment lineup?A handful of investment firms are betting on it by bringing a longtime staple in employer-sponsored retirement plans -- the stable value fund -- to the retail mutual fund market as an investment option for individual retirement accounts.One fund launched two weeks ago and at least four more are awaiting approval from the Securities and Exchange Commission.

Legg Mason Inc. launched a new value fund yesterday, saying the time is ripe for an investment style based on buying stocks that have temporarily fallen out of favor.The Legg Mason Classic Valuation Fund is managed by a team led by Tony Hitschler, chief investment officer of Brandywine Asset Management Inc., and Alec Cutler, Brandywine's managing director. Brandywine is a subsidiary of Baltimore-based Legg Mason."Traditional value has been out of favor for about four years, and the market tends to move in style cycles," said Cutler.

T. Rowe Price Associates Inc. reopened its Small-Cap Value Fund to new investors yesterday after closing it 2 1/2 years ago when it was being flooded with more money than could be prudently invested.The Baltimore-based mutual fund company decided to reopen the fund after its assets had slipped about 30 percent, to $1.58 billion, from a high of $2.29 billion in March 1996.Last spring, about $150 million flowed out of the fund as investors dumped small stocks in favor of blue chips. The fund's manager had to sell shares in the portfolio to meet redemptions.

T. Rowe Price Associates Inc. said yesterday that it is indefinitely closing its popular Small-Cap Value Fund to new investors."The fund is at a size that is about as big as I think it can be to actually invest the money comfortably," said Preston Athey, president of the fund and its manager for 4 1/2 years.The fund's total assets have shot up by $590 million in the past 14 months to $1 billion. Net cash inflows, the amount of money investors have put into the fund minus withdrawals, have jumped to $480 million over the same period.

SAN JOSE, Calif. -- There isn't a shortage of mutual fund managers who consider themselves value players. Yet all take a back seat to Edwin Walczak -- portfolio manager of Vontobel U.S. Value Fund and the fund industry's strictest disciple of value gurus Benjamin Graham and Warren Buffett.Adherence to their tenets keeps Mr. Walczak entirely out of major categories of stocks, such as technology and cyclical issues, even when they're dirt-cheap.But his religious-like devotion to value investing -- buying stocks at a discount, presumably because they're temporarily depressed -- has paid off with handsome returns, suggesting this fund makes sense for queasy investors.

Suffering an embarrassment of riches, T. Rowe Price Inc. said yesterday that for the first time in 21 years it has closed the door at one of its mutual funds to almost all new investors.The T. Rowe Price Small-Cap Value Fund said it would continue to accept money from current investors, and from those who participate in employer-sponsored payroll deduction retirement plans. The company said the closing was temporary, but there is no target date for when it might reopen.In closing the fund, the Baltimore mutual fund company has joined a growing number of other fund companies.

Suffering an embarrassment of riches, T. Rowe Price Inc. said yesterday that for the first time in 21 years it has closed the door at one of its mutual funds to almost all new investors.The T. Rowe Price Small-Cap Value Fund said it would continue to accept money from current investors, and from those who participate in employer-sponsored payroll deduction retirement plans. The company said the closing was temporary, but there is no target date for when it might reopen.In closing the fund, the Baltimore mutual fund company has joined a growing number of other fund companies.

Continuing Friday's slide and following bond prices downhill, stocks tumbled sharply yesterday. The Dow Jones industrial average plunged 37.45 points and closed at 3,575.80, now off 57 points in the last three gloomy sessions.MONEY TALKS: "One outstanding success can often cover a multitude of blunders." (Stock Trader's Almanac) . . . "A fool and his money are soon parted. What I want to know is how they got together in the first place." (Cyril Fletcher) . . . "The time to invest money is when you have it."

It's a star-studded cast in mutual funds - and also a shocking flop on this year's complex investing stage. With the financial crisis playing out in ways many professionals failed to predict, and oil also surprising, some of the best and brightest of the fund business have turned into the biggest losers of the year. They include exalted names such as Bill Miller of Baltimore-based Legg Mason Value fund, Martin Whitman of Third Avenue Value fund, David Dreman of DWS Dreman High Return, Wally Weitz of Weitz Value, Mason Hawkins and Staley Cates of the Longleaf Partners team, Christopher Davis and Kenneth Feinberg of Davis New York Venture, and the team that manages American Funds Amcap fund.

Which Maryland congressman owed more than $10,000 in credit-card debt last year? Which one lost tens of thousands of dollars investing in his brother-in-law's company? Which Maryland senator gave the old portfolio a political face-lift? The answers, in the forms that senators and representatives just filed showing the previous year's financial activity, are worth a peek. If the measure of a man is revealed first in his friendships and second in what he reads, where he puts his money can't be far behind.

Why hasn't Eli Lilly & Co. stock performed better? It's a big retirement holding of mine. - R.C., via the Internet Although the pharmaceutical giant will continue to be a big-time player, its lowered expectations for the rest of this year have taken a toll on its stock. After previously forecasting 7 percent to 9 percent sales growth for 2006, management now expects results in the lower end of that range. That's due in part to disappointing sales of its insulin drugs. It also faces increased competition for its Zyprexa antipsychotic medication, which is its top-selling drug but has seen its sales slip slightly in the United States.

The stock market threw a party for investors during the first few days of this year. But if you think you were part of the festivities, you had better take a look at your portfolio. You might have left yourself off the guest list. The action recently has centered on growth stocks, relatively large company stocks and the mutual funds that invest in them - the funds that many investors dumped in terror as stocks crashed during the early 2000s. Another winner during the past two years has been international funds, an investment that countless investors fled in the late 1990s as the Asian financial crisis destroyed fortunes in developing markets.

Wallace R. Weitz, a follower of Warren E. Buffett's investment strategy, spent about $200 million on shares of Wal-Mart Stores Inc. and Tyco International Ltd. in the second quarter as he tried to revive his Weitz Value Fund. The $4 billion fund, one of its category's best performers for much of the 1990s and during the three-year bear market that ended in 2002, is down 7 percent this year. Weitz Value ranks 95th in its class of 96 funds tracked by Bloomberg, beating only the $34.4 million Dreyfus Premier Select Fund.

I'm considering purchasing shares of Royce Value Fund. What is your opinion? K.T., via the Internet It has a clear strategy that has paid off handsomely for investors since the fund's inception in 2001. This knowledgeable fund specializing in small-cap stocks owns about 60 stock names, unlike some rivals that have 200 or more. By avoiding the smallest micro-cap stocks and sticking with more established names in the $500 million to $5 billion market-cap range, it is less volatile than most of its peers.

Supersize me. Individual investors, institutions and pension funds love to own giant stocks that command everyone's attention. Market capitalization is computed by taking the total number of shares and multiplying by the share price. The stocks with the largest capitalization earned their popularity because their companies were quicker, shrewder and more forceful than the competition. Investors in these stocks expect the winning ways to continue, providing a foundation for their portfolios.

About nine years ago, I invested $20,000 in Merrill Lynch Large Cap Value Fund Class B shares (ticker symbol: MBLVX). Not too long ago, I checked out my monthly statement and noticed they switched to Class A shares. They did this without telling me. When I asked why it was done, my broker gave me an unsatisfactory explanation. Why did this happen? - H.N., Chicago You've probably witnessed a conversion: a time-release changeover from Class B shares to Class A shares. There is nothing sinister about this change.

THERE IS money to be made if Omnicare Inc. succeeds in its drawn-out takeover raid of Baltimore's NeighborCare Inc. NeighborCare stock closed Friday at $28.05. Omnicare is offering $30. That's a potential 7 percent return, putting the deal near the top of Bloomberg's list of theoretical "arbitrage" profits from pending mergers. Or more than 7 percent if Omnicare sweetens the package. But will the deal ever get done? "That's a good question, isn't it?" says Frank G. Morgan, who follows the stock of both companies for Jefferies & Co. He doesn't know the answer.

WHENEVER A mutual fund company makes an announcement designed to build the public's excitement and interest, investors should start looking for the answer to one simple question: "What's the big deal?" Generally, there is barely a small deal. As long-term investment vehicles, funds don't generate much must-know-it-today news, which is why shareholders need to be able to discern the difference between real news and lame self-promotion. To see the latter, look no further than a news release issued recently by the Preferred International Value Fund.