MONEY Tocqueville Opportunity Is One Of The Best Mid-Cap Funds This Year BY LAWRENCE CARREL CONTRIBUTOR M utual fund manager Thomas Vandeventer marches to his own drummer. It seems to be working. The fund Vande- venter runs, The Tocqueville Opportunity Fund (TOPPX), is up 36% year to date, according to Morningstar, blowing away the 25.1% on its benchmark, the Russell Mid Cap Growth Index. And while the fund primarily holds small- and mid-cap stocks, it’s posting a return more than double large-cap indices such as the S&P 500 and the Russell 1000. The fund, which has $92 million in assets under manage- ment, beat its benchmark on an annualized basis for the three- year period 18.3% vs. 14.4%, and the 5-year period, 11.9% vs. 10.6%, according to Morningstar. Vandeventer uses his own multi-factor screen, which he runs on a monthly basis, looking for companies that possess the potential to deliver above-average long-term earnings growth. “It has a very elegant ranking algorithm that I can flip around. If I want to put more weight on the growth factors I can,” said Vandeventer. “Or in a defensive market, I’m going to de-emphasize growth and put more emphasis on the valu- ation factors.” He said the screen, which looks for price-to-cash-flow margins and gross margins, doesn’t work for a lot of com- panies. But, it works well in sectors like consumer staples, consumer discretionary, materials, and industrials. Once he identifies the companies that fit his metrics, he sticks with them as long as they execute. This portion makes up about 30% of the portfolio. For the other 70% of the fund, he looks for market leaders in growth industries, such as technology, health-care services and biotechnology that have a strong brand name and whose sales and earnings have increased at a consistent rate. Vandeventer said he’s trying to identify companies that have something unique that confer a competitive advantage to the business. He determines this by looking at the rate of top line growth, the company’s mix of products or services, the pricing power behind them, and its ability to maintain pricing. Sometimes, the company has capital assets that allow it to invest a lot of capital, other times it’s a cost-of-goods advantage, patents, trademarks, or a first-mover advantage. The fund has a high turnover, 151%, because these stocks typically have a high volatility. Part of the process is reaching back and identifying compa- nies that have the optimal blend of valuation and growth. In the small- to mid-cap space, most of these companies don’t get much coverage from Wall Street. AUGUST 30 • 2019 ONLINE EDITION Tocqueville Thomas Vandeventer, portfolio manager of the Tocqueville Opportunity Fund.
Transcript
MONEY
Tocqueville Opportunity Is One OfThe Best Mid-Cap Funds This Year
BY LAWRENCE CARRELCONTRIBUTOR
Mutual fund manager Thomas Vandeventer marches to his own drummer.
It seems to be working. The fund Vande-venter runs, The Tocqueville Opportunity Fund
(TOPPX), is up 36% year to date, according to Morningstar, blowing away the 25.1% on its benchmark, the Russell Mid Cap Growth Index.
And while the fund primarily holds small- and mid-cap stocks, it’s posting a return more than double large-cap indices such as the S&P 500 and the Russell 1000.
The fund, which has $92 million in assets under manage-ment, beat its benchmark on an annualized basis for the three-year period 18.3% vs. 14.4%, and the 5-year period, 11.9% vs. 10.6%, according to Morningstar.
Vandeventer uses his own multi-factor screen, which he runs on a monthly basis, looking for companies that possess the potential to deliver above-average long-term earnings growth.
“It has a very elegant ranking algorithm that I can flip around. If I want to put more weight on the growth factors I can,” said Vandeventer. “Or in a defensive market, I’m going to de-emphasize growth and put more emphasis on the valu-ation factors.”
He said the screen, which looks for price-to-cash-flow margins and gross margins, doesn’t work for a lot of com-panies. But, it works well in sectors like consumer staples, consumer discretionary, materials, and industrials. Once he identifies the companies that fit his metrics, he sticks with them as long as they execute. This portion makes up about 30% of the portfolio.
For the other 70% of the fund, he looks for market leaders in growth industries, such as technology, health-care services and biotechnology that have a strong brand name and whose sales and earnings have increased at a consistent rate.
Vandeventer said he’s trying to identify companies that have something unique that confer a competitive advantage to the business. He determines this by looking at the rate of top line growth, the company’s mix of products or services, the pricing power behind them, and its ability to maintain pricing.
Sometimes, the company has capital assets that allow it to invest a lot of capital, other times it’s a cost-of-goods advantage, patents, trademarks, or a first-mover advantage.
The fund has a high turnover, 151%, because these stocks typically have a high volatility.
Part of the process is reaching back and identifying compa-nies that have the optimal blend of valuation and growth. In the small- to mid-cap space, most of these companies don’t get much coverage from Wall Street.
AUGUST 30 • 2019 ONLINE EDITION
TocquevilleThomas Vandeventer, portfolio manager of the Tocqueville Opportunity Fund.
PRINTED COPY FOR PERSONAL READING ONLY. NOT FOR DISTRIBUTION.
FORBES
MONEY
“It’s a systematic approach that is very useful because it gets you to the companies before Wall Street or other investors do,” said Vandeventer. “It forces you to understand what the ad-dressable market is and forecast how successful the products and services can be.”
His largest holding in the health-care arena is Sage Thera-peutics (SAGE), a biotechnology company in Cambridge, Mass. The company makes drugs that act on the central nervous sys-tem (CNS). It recently got FDA approval for Zulresso, the first drug to treat postpartum depression.
“Postpartum depression effects 10% to 25% percent of mothers,” said Vandeventer. “What’s unique is this drug starts
working quickly, and is long acting, so you might only take it intermittently when you get depressed.”
The top four holdings are Shopify (SHOP), ServiceNow (NOW), Workday (WDAY), and Sage. The fund charges an expense ratio of 1.27%. F
Lawrence CarrelETFs & Mutual Funds
I’ve been a financial journalist for many years. I’m the author of ETFs for the Long Run, Investing in Dividends for DUMMIES and Dividend Stocks for DUMMIES.
From the Forbes Contributor Network and not necessarily the opinion of Forbes Media LLC.(#S076327) Reprinted with permission of Forbes Media LLC. Copyright 2019. To subscribe, please visit Forbes.com or call (800) 888-9896.
For more information about reprints and licensing, visit www.parsintl.com.
PRINTED COPY FOR PERSONAL READING ONLY. NOT FOR DISTRIBUTION.
40 West 57th Street New York, NY 10019 | (212) 698-0800 | www.tocqueville.com
Disclosure: Opinions and information provided in this article are as of the date indicated and reflect the views of the author as of the date or dates cited and may change at any time. Neither the information nor the opinions stated should be construed as investment advice. No representation is made concerning the accuracy of cited data, nor is there any guarantee that any projection, forecast or opinion will be realized.
The discussion in the article represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Information contained therein is based on information believed to be reliable. However, we do not make any representation as to its accuracy or completeness. Any statement non-factual in nature constitutes only current opinion, which is subject to change. Securities holdings that are referenced may be held in other portfolios managed by Tocqueville or owned by principals, employees and associates of Tocqueville, and such references should not be deemed as an understanding of any future position, buying or selling, that may be taken by Tocqueville. The Tocqueville Opportunity Fund may be offered only to persons in the United States and by way of a prospectus. This information should not be considered a solicitation or offering of any investment products or services to investors residing outside of the United States. Please consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. The prospectus contains this and other information about the Fund. For more complete information and current performance on this Fund, including its charges and expenses, please obtain a free prospectus by calling 1-800-697-3863 or visiting http://www.tocquevillefunds.com. Please read the prospectus carefully before you invest or send money. The Fund invests in smaller companies, which involve additional or special risks such as small companies rely on limited product lines, financial resources and business activities that may make them more susceptible than larger companies to setbacks or downturns; and small cap stocks are less liquid and more thinly traded which make them more volatile than stocks of larger companies. Fund holdings are subject to change at any time. Holdings are based on percent of net assets. The average annual total returns and top ten holdings for The Tocqueville Opportunity Fund ending August 31, 2019 are as follows:
Average Annual Rates of Return Top Ten Holdings 1 Year 0.27% Shopify, Inc. – Class A 6.52% 3 Year 18.66% ServiceNow, Inc. 4.86% 5 Year 11.81% Workday, Inc. – Class A 3.78% 10 Year 14.46% Okta, Inc. 2.90% Gross Annual Fund Operating Expenses 1.34% Paycom Software, Inc. 2.87% Fee Waiver/Expense Reimbursement:^ -0.07% Twilio, Inc. – Class A 2.71% Annual Fund Operating Expenses after Fee Waiver/Expense Reimbursement
1.27% Coupa Software, Inc. 2.35% Fiserv, Inc. 2.29%
Sage Therapeutics, Inc. 2.25% PayPal Holdings, Inc. 2.14%
Total 32.67% Mutual Fund investing involves risk. Principal loss is possible. Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The performance assumes reinvestment of capital gains and dividends. Fund performance current to the most recent month-end may be lower or higher than the performance quoted and can be obtained by calling 1-800-697-3863 or visiting www.tocquevillefunds.com. Performance for periods before 10/12/10 is for The Tocqueville Small Cap Fund, which was renamed The Tocqueville Opportunity Fund on 10/12/10. The Tocqueville Small Cap Fund had different Portfolio Managers until 7/1/10 and different investment objectives and strategies until 10/12/10. The Fund discloses its top ten holdings on the Tocqueville website no earlier than 15 calendar days after the end of each month. References to other mutual funds should not be interpreted as an offer of those securities.
^The Advisor has contractually agreed to waive management fees and/or reimburse expenses in order to ensure that the Fund's expense ratio does not exceed 1.25% (excluding taxes, interest expense, acquired fund fees and expenses, or extraordinary expenses such as litigation) until at least 3/1/2020. In the absence of these fee waivers, total returns would be lower.
40 West 57th Street New York, NY 10019 | (212) 698-0800 | www.tocqueville.com
Disclosure: Opinions and information provided in this article are as of the date indicated and reflect the views of the author as of the date or dates cited and may change at any time. Neither the information nor the opinions stated should be construed as investment advice. No representation is made concerning the accuracy of cited data, nor is there any guarantee that any projection, forecast or opinion will be realized.
The discussion in the article represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Information contained therein is based on information believed to be reliable. However, we do not make any representation as to its accuracy or completeness. Any statement non-factual in nature constitutes only current opinion, which is subject to change. Securities holdings that are referenced may be held in other portfolios managed by Tocqueville or owned by principals, employees and associates of Tocqueville, and such references should not be deemed as an understanding of any future position, buying or selling, that may be taken by Tocqueville. The Tocqueville Opportunity Fund may be offered only to persons in the United States and by way of a prospectus. This information should not be considered a solicitation or offering of any investment products or services to investors residing outside of the United States. Please consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. The prospectus contains this and other information about the Fund. For more complete information and current performance on this Fund, including its charges and expenses, please obtain a free prospectus by calling 1-800-697-3863 or visiting http://www.tocquevillefunds.com. Please read the prospectus carefully before you invest or send money. The Fund invests in smaller companies, which involve additional or special risks such as small companies rely on limited product lines, financial resources and business activities that may make them more susceptible than larger companies to setbacks or downturns; and small cap stocks are less liquid and more thinly traded which make them more volatile than stocks of larger companies. Fund holdings are subject to change at any time. Holdings are based on percent of net assets. The average annual total returns and top ten holdings for The Tocqueville Opportunity Fund ending August 31, 2019 are as follows:
Average Annual Rates of Return Top Ten Holdings 1 Year 0.27% Shopify, Inc. – Class A 6.52% 3 Year 18.66% ServiceNow, Inc. 4.86% 5 Year 11.81% Workday, Inc. – Class A 3.78% 10 Year 14.46% Okta, Inc. 2.90% Gross Annual Fund Operating Expenses 1.34% Paycom Software, Inc. 2.87% Fee Waiver/Expense Reimbursement:^ -0.07% Twilio, Inc. – Class A 2.71% Annual Fund Operating Expenses after Fee Waiver/Expense Reimbursement
1.27% Coupa Software, Inc. 2.35% Fiserv, Inc. 2.29%
Sage Therapeutics, Inc. 2.25% PayPal Holdings, Inc. 2.14%
Total 32.67% Mutual Fund investing involves risk. Principal loss is possible. Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The performance assumes reinvestment of capital gains and dividends. Fund performance current to the most recent month-end may be lower or higher than the performance quoted and can be obtained by calling 1-800-697-3863 or visiting www.tocquevillefunds.com. Performance for periods before 10/12/10 is for The Tocqueville Small Cap Fund, which was renamed The Tocqueville Opportunity Fund on 10/12/10. The Tocqueville Small Cap Fund had different Portfolio Managers until 7/1/10 and different investment objectives and strategies until 10/12/10. The Fund discloses its top ten holdings on the Tocqueville website no earlier than 15 calendar days after the end of each month. References to other mutual funds should not be interpreted as an offer of those securities.
^The Advisor has contractually agreed to waive management fees and/or reimburse expenses in order to ensure that the Fund's expense ratio does not exceed 1.25% (excluding taxes, interest expense, acquired fund fees and expenses, or extraordinary expenses such as litigation) until at least 3/1/2020. In the absence of these fee waivers, total returns would be lower.
PRINTED COPY FOR PERSONAL READING ONLY. NOT FOR DISTRIBUTION.
