Tom Forester, manager of the Forester Value Fund, will bring into the fourth quarter a cautiously optimistic perspective that will include a bit of his trademark profit-taking from some of the portfolio's best performers.
Mr. Forester, president and founder of Forester Capital Management Ltd., stood out in 2008 as the best performing diversified equity mutual fund with a 0.4% gain — the only diversified fund to produce positive performance last year, according to Morningstar Inc.
“Right now I'm feeling that the market is getting a little top-heavy, and I have already taken some beta out from some of the industrial names,” he said.
One stock that he still owns, but has trimmed following a significant run up, is Coca-Cola Enterprises Inc. (CCE). The stock, which was trading in the $21 range last week, is up more than 77% from the start of the year — and up 116% from the March 9 low, when it closed a $9.72 per share.
A few other positions that have helped his large-cap value strategy include State Street Corp. (STT), and Hewlett-Packard Co. (HPQ).
Both stocks were added to the portfolio right around the March low.
Hewlett-Packard, which was trading above $46 last week, is up 84% from when Mr. Forester bought it and up 27% from the start of the year.
State Street, which traded above $54 last week, is up 217% from where Mr. Forester bought it and up 38% from the start of the year.
“I guess the only problem is I didn't buy enough,” Mr. Forester said of some of his top-performing stocks.
Mr. Forester is less concerned about the upcoming third-quarter earnings season than he is about the year's fourth-quarter earnings, which will first begin getting reported in January 2010.
“I think third-quarter earnings will be good because there has been a lot of stimulus,” he said. “But the question will be whether we can continue as these stimulus programs run off, because investors are already baking in better numbers for the fourth quarter.”
A trademark of Mr. Forester's performance is his willingness to move to the sidelines and into cash when everyone else seems to be moving into the market — a strategy that could lead to underperforming the broad indexes in bull markets, but outperforming in a bear market environment.
The Forester Value Fund (FVALX) gained 13.5% this year through Thursday. By comparison, the S&P 500 gained 17.9% gain over the same period. (For a full analysis of Mr. Forester's portfolio management strategy, see Jeff Benjamin's Investment Insights column in the Sept. 21 issue of InvestmentNews).