Brandywine Fund (BRWIX)

By Ian Wyatt, MutualsAdvisor.com | BRWIX | Mar 07, 2008 | comment

By Ian Wyatt, Editor-In-Chief

 Jason Cimpl, Research Analyst

 Ann C. Logue, Research Analyst

Fund Type: Midcap Growth

Expense Ratio: 1.08%

Min. Investment: $10,000

Web: http://www.bfunds.com

Top 3 Holdings:

Oracle

McDermott International

Thermo Fisher Scientific

The Brandywine Fund’s managers are bold. They choose stocks they like and sell them when the price or fundamentals are no longer attractive. Brandywine’s managers are not afraid to trade against the market, either. The result is a fund with superb long-term performance, although the fund has had the occasional off year. It carries a beta of 1.28, meaning its performance tends to be more volatile than the market. (In the Modern Portfolio Theory, beta is a measurement of volatility relative to the market, with the market itself carrying a beta of 1. At 1.28, then, Brandywine Fund is riskier.) Brandywine’s managers are committed to being fully invested (with the fund 98.1% in common stock right now), and they often trade in and out of stocks as company outlooks change. The portfolio turnover rate for the year ending Sept. 30, 2007 was 161.5%; some years, the turnover has approached 300%. That combination of high turnover and high-powered but volatile performance makes the Brandywine Fund a great option for such long-term tax-sheltered accounts as IRAs.

The fund is managed by Friess Associates, a wealth management firm in Maryland. It employs an army of research analysts looking for great investment ideas for individual clients as well as the firm’s three mutual funds. Friess Associates, in turn, is owned 70% by Affiliated Managers Group, Inc. (NYSE: AMG), a holding company for several different money management firms. The remaining 30% is owned by firm employees, giving them an incentive to stick around. The lead manager on the Brandywine Fund is Bill D’Alonzo, who has been with the firm since 1981 and notes in his biography that all of his personal assets are managed by Friess Associates. He works with John Ragard and Jonathan Fenn, who manage the firm’s research team and who have been on the Friess management committee since 2001.

Although Brandywine Fund is listed in the midcap growth category, the managers like to think of themselves as “all-cap” buyers. They make commitments to any company that they think has growth potential, no matter how large or how small. Brandywine’s largest holding, Oracle Corporation (Nasdaq: ORCL) is decidedly large, with a $104 billion market capitalization. The enterprise software behemoth makes up 5.20% of Brandywine’s assets. The next largest investment is McDermott International (NYSE: MDR), which represents 4.32% of assets, has a $10.4 billion market capitalization, and provides energy construction and services all over the world. The fund’s third largest holding, at 3.85% of assets, is Thermo Fisher Scientific Inc. (NYSE: TMO), a $20 billion market capitalization company that makes equipment and supplies used in medical and research laboratories.

Brandywine Fund’s managers only invest in U.S. companies, but they prefer those that generate lots of profits overseas. This gives the fund exposure to markets that are growing faster than the United States while providing some diversification against the risk of economic slowdown domestically. The largest industry sector is aerospace and defense, at 7.9 % of assets and growing in a troubled world. Computer hardware makes up 7.3% of assets, and semiconductors represent 6.5%. It’s a capital-intensive mix, but that shouldn’t be taken to mean that this is a capital-intensive fund. Instead, it’s where D’Alonzo and company see the best opportunities when U.S. consumers are tapped out.

This is a no-load fund that isn’t heavily advertised. The philosophy seems to be that those who care will find out about it. Although there is no 12b-1 fee, the expense ratio is 1.08%, reflecting the costs of research and portfolio trading. Of course, as long as the Friess team delivers performance, the fees will be of little consequence.

In fact, investors receive rich rewards for putting up with the fund’s volatility. Brandywine Fund gained 21.8% in 2007, against the Russell 3000’s increase of 5.14% and the S&P 500’s gain of 5.48%. Since its Dec. 31, 1985 inception date, the Brandywine Fund has posted a compound average annual return of 13.94% versus 11.62% for the Russell 3000 and 11.79% for the S&P 500. That makes for a lot of happy Brandywine shareholders.

 This article is from the Spring 2008 report, "MutualsAdvisors.com, Mutual Fund Investing 2008: The 10 Best Funds to Buy Now," Click here for the latest report!

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