An In-Depth Look at the Tweedy Browne Value Fund
February 10, 2015
by Larry Swedroe
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When investors are looking for a hedge fund to invest their money with, they usually look at returns. Of course, the larger the positive return, the better, but what about during major market selloffs? It may be easy to discount a hedge fund's negative return when everyone else lost a lot of money. However, hedge Read More
Tweedy Browne has long been one of the most respected and iconic names in the mutual fund industry. Morningstar reported that as of the end of 2014, the fund family had more than $10 billion in assets in its four funds. But, over the long term, has the firm’s flagship fund outperformed a passive benchmark?
The firm has a reputation as a value-oriented investor that follows the principles of Benjamin Graham and David Dodd. In fact, in a 1984 speech Warren Buffett gave in honor of the 50th anniversary of the publication of Graham and Dodd’s book, Security Analysis, he identified Tweedy Browne as one of “The Superinvestors of Graham-and-Doddsville.”
Further establishing the fund’s credibility, Tweedy Browne American Value was selected as one of nine “dyed-in-the-wool value investors” by legendary Sequoia Fund Chief Executive Bob Goldfarb in 2006. Goldfarb previously had been asked by Columbia University professor Louis Lowenstein to select a set of funds that best followed the essential edicts of Graham and Dodd.
At the beginning of 2015, the Tweedy Browne Value Fund (TWEBX) carried a four-star rating from Morningstar, which considers it a large-value fund. Given its great reputation, Advisor Perspectives asked me to analyze the fund’s performance. I’ll do that by comparing it to a passively managed alternative, the U.S. Large Cap Value Fund (DFLVX) from Dimensional Fund Advisors (DFA). (Full disclosure: My firm, Buckingham, recommends Dimensional funds in constructing client portfolios.)
By comparing the performance of these two funds, we can determine not only if TWEBX outperformed a well-designed, passively managed U.S. large-value fund, but also if the freedom to “scour the globe” for the best values provided great opportunity.
In other words, did the fund managers’ ability to tactically allocate add or subtract value?
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