There isn’t a Hall of Fame for mutual fund managers. But if there was, Joel Tillinghast would be getting buzz as a first-ballot inductee.
Since his fund, Fidelity Low-Priced Stock, launched in December 1989, investors have enjoyed an annualized total return of about 13%. That smashes the roughly 9% turned in by the fund’s benchmark Russell 2000 index, which tracks the performance of small-company stocks, and is well ahead of the S&P 500 index’s just over 10% return over the same period.
The difference in performance is bigger than it seems. Had you invested $1,000 in Low-Priced Stock on Tillinghast’s first day, you’d currently have more than $57,000, according to data provided by Morningstar Direct. The same investment in an S&P 500 index fund would be worth about $25,000.
Tillinghast picked up three co-managers in 2016 and 2017, and two of them — Morgan Peck and Sam Chamovitz — will take the helm when Tillinghast steps down at year end. They will no doubt look to continue a strategy of picking undervalued small and midsize company stocks they believe can deliver outsize long-term returns to shareholders.
In the meantime, Tillinghast chatted with CNBC Make It about lessons in stock-picking, keys to long-term investing success and the changing landscape for retail investors.
CNBC Make It: Your fund’s mandate has changed some over the years, but the approach to picking stocks has remained the same. How would you describe your strategy?
Tillinghast: We look for stocks that trade at a discount to their intrinsic value. And we tend to search in the places that are least in the public eye. So they’re probably not the things that are making up the lead stories of CNBC or The Wall Street Journal. They’re hidden in the back pages.
Those would be small and mid-cap stocks [those with small and medium market capitalizations], domestically and globally. Anything that is sort of neglected enough that it might be undervalued.
How do you define a value stock? What makes a certain…
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