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Interestingly, value funds seem to be the type of domestic equity funds that investors should be seeking out. But of course, anything that has domestic equities in it seems to be a source of fear among mutual fund investors. With so many people getting out of equity funds and opting for bond funds and emerging markets funds, looking at the Perkins Mid Cap Value Fund (JMCVX) might be a complete waste of time… or is it?

A Value Fund With Good Returns

In the past decade, this mid-cap, value fund has outperformed both the index (S&P 500) in all but one year (2006) as well as its category in eight of the last ten years. On a YTD basis, it is outperforming the index but not the category. This poses an interesting question: What is this equity fund doing that is right by the Index but wrong by the Category.

The obvious answer is this fund provides high returns at low risk. While it ranks well in the Morningstar ratings system (five stars for its 3, 5, 10 and Overall), it also has taken a fairly prudent approach to the current portfolio. Seeing more value in Healthcare than in Financial Services, this fund has taken a heavier position in the former and gone light on the latter. Ironically, of its top holdings it is the financial services firms that have underperformed, often to the tune of double digits with firms like Invesco (a 1.3% holding) returning -21.4%, People’s United Financial (another 1.3% holding) returning -21.2%, etc.. While the fund is managing through these losers by averaging down, they are surely a huge sore spot…

In comparison, its second largest sector weighting (Energy at 12.5% of the portfolio, overweight compared to its peers) has been hit and miss. Forest Oil, a 1% holding, has returned almost 24% on a YTD basis while Hess Corp, a larger 1.2% holding, has taken away nearly 12%.

So while returns and weighting have been a hit and miss process for this equity fund, what investors can be assured about is the fund’s proper management of its assets. With 153 different equity securities in the portfolio, the management team needs to be on top of every little development and potential problem. So far, they have managed the risks fairly well.

What worries us at the Mutual Fund Site is that all it will take is a wrong call on one sector and this house of cards falls apart. But more importantly, what gives us tremendous faith in this fund is its ability spread out its risk while also maximizing on the winning positions and averaging down on the losers. This fund appears to be very disciplined in its investment process, methodical almost.

One of the largest “new” securities to this fund is the addition of Wal Mart. We like to see this defensive position simply because of the current uncertainly facing the market. As well, we like to see that it is putting more money into its losing areas which happens to be financial services, all of which are mid-cap securities. And regular visitors to the Mutual Fund Site know that we are bullish on mid cap financial services firms, so the type of adaptation seen in the Perkins Mid Cap Value Fund is one we obviously applaud.

Overall, this is one of those equity funds that has a strong track record of providing investors with consistently high or above average returns for as little risk as can be expected from this type of value fund. While the current portfolio would be an area of concern in some regards, the fund is ever-evolving and making changes that we see as beneficial in the medium to long-term.