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David Trainer
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Follow me on Twitter: @NewConstructs David is CEO of New Constructs (, an independent research firm that leverages proprietary technology to find key insights from the Financial Footnotes of 10Ks and 10Qs. Having analyzed over 70,000 annual reports and their Financial... More
My company:
New Constructs
My blog:
The Diligence Institute
My book:
The Valuation Handbook
  • S&P 500 Index Funds Are Better and Cheaper Than Legg Mason Value Trust 0 comments
    Dec 2, 2010 6:04 PM | about stocks: SPY
    We recommend investors buy an S&P500 ETF/Index fund rather than LMVTX, which offers less upside at a higher cost. There is no reason for investors to pay LMVTX’s 1.69% total expense ratio while the SPY, the most common S&P 500 ETF, has a total expense ratio of only 0.09%.

    As detailed in the report, LMVTX is a much more expensive and less attractive version of the S&P 500.  This conclusion is based on analyzing the Risk/Reward Ratings for all the companies in LMVTX. We found that the fund LMVTX allocates 70% of its value to stocks with a Neutral Rating or worse. The S&P 500 only allocates 55%.

    Methodology: Fundamental Research for Mutual Funds and ETFs

    Our analysis of Legg Mason Capital Management Value Trust (MUTF:LMVTX) is based on the aggregation of data for 43 of the 44 companies in LMVTX weighted according to the fund’s holdings as of November 15th, 2010. (PRU is excluded from this analysis and represents 1.1% of LMVTX’s value. PRU is not covered by New Constructs because the company has multiple classes of common stock with differing economic interest.) LMVTX also holds 2.55% of its total value in short-term investments This report considers only the 96.35% of the fund invested in equities. See Figure 5 for a complete list of companies, their weights in the fund, and their ratings. This report offers benchmarks for (1) investors considering buying LMVTX and for (2) comparing other mutual funds to LMVTX.

    This research on funds and ETFs offers a new and unique approach to help investors assess the merit of investing in mutual funds and ETFs. We apply the same rigorous analysis to the group of stocks in LMVTX as we do to individual stocks.

    Ever wondered what it would be like to evaluate funds with the same rigor that you can evaluate individual stocks - that is exactly what we deliver in our new ETF/fund research product.

    Historically, fund or ETF ratings have relied almost entirely on the past price performance for their rankings. I don’t think that past price performance is any more indicative of future price performance for individual stocks than it is for groups of stocks (i.e. ETFs and funds, etc). Accordingly, we developed the first-ever fundamental research for mutual funds; so investors can apply as much rigor to their assessment of funds as they do individual stocks.

    Given the success of our Rating system for individual stocks, we believe its application to groups of stocks (i.e. ETFs and funds) will also help investors make more informed decisions.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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