David Winters’ Q4 Letter: We Have Watched As Many Funds have Morphed Into Quasi-Index Funds

David Winters’ Q4 Letter: We Have Watched As Many Funds have Morphed Into Quasi-Index Funds
Image source: Wintergreen Funds

For the year ended December 31, 2014, the gain of the Standard & Poor’s 500 Composite Index (“SP”) was striking because of the extremely narrow range of securities that contributed to the performance of the S;P. If you did not own the top 25 gainers, you missed out on over 50% of the SP’s overall returns. The technology sector contributed an astounding 29% of the return, health care 26%, and financials 19% – overall these 3 sectors contributed over 74% of the SP’s performance.

David Winters’ Wintergreen Advisers: Investment Philosophy

During the recent period, Wintergreen Fund, Inc. (the “Fund” or “Wintergreen”) has remained true to its core investment philosophy. The Fund remains concentrated with about 35 positions. We have watched as many other funds have morphed into quasi-index funds, holding hundreds of positions and being slightly overweight or underweight to their benchmark in select cases. We don’t believe that is what the goal of an actively managed mutual fund should be. We will not invest in securities that we don’t have conviction in or jump on the bandwagon only because they are going up. The Fund’s portfolio turnover remained low (13%) in 2014, as we remain long-term investors. We will not try to time stock markets. We continue to rely on our long-standing belief that the following three criteria are the hallmark of good investments:

First, a business that has good or improving economics, and often generates sales and profits in multiple currencies and jurisdictions;

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Second, a management team that is working for the benefit of all shareholders and not just for its own short-term compensation; and

Third, the security is available at a compelling price.

David Winters’ Wintergreen Advisers: Value Investing Approach

During the dot-com mania of the late 90’s, there was a similar period of time when the value investing approach was out of favor. Technology stocks were untouchable; they had wild valuations and went up every day, seemingly with complete disregard to any underlying fundamentals. As you recall, shortly thereafter, the tech bubble collapsed, value returned to favor, and the long-term value approach performed very well. Staying true to our core principals worked then, and we firmly believe our investing process will again return to favor.

During 2014, the Fund’s Institutional Class of shares and Investor Class of shares had slightly negative returns. The Fund had strong returns from long-term portfolio holdings Reynolds American Inc., Consolidated-Tomoka Land Co., and Jardine Matheson Holdings Ltd., which was sold during the year. Securities that underperformed included Swatch Group AG, Wynn Macau Ltd., and Galaxy Entertainment Group Ltd. The Fund also utilized forward currency contracts which had an overall positive impact on performance during the period.

If you have an important point to make, don’t try to be subtle or clever. Use a pile driver. Hit the point once. Then come back and hit it again. Then hit it a third time – a tremendous whack.

-Winston Churchill

See the full letter below.

View a recent listing of the Fund’s Top 10 Holdings

David Winters, CFA

Portfolio Manager

The views contained in this report are those of the Fund’s portfolio manager as of December 31, 2014, and may not reflect his views on the date this report is first published or anytime thereafter. The preceding examples of specific investments are included to illustrate the Fund’s investment process and strategy. There can be no assurance that such investments will remain represented in the Fund’s portfolios. Holdings and allocations are subject to risks and to change. The views described herein do not constitute investment advice, are not a guarantee of future performance, and are not intended as an offer or solicitation with respect to the purchase or sale of any security.

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