Stock Talk - Josh Charney, Morningstar

Good morning and welcome back into the financial exchange giant -- out of filling in for Barry Armstrong today. -- coming on line with this right now. And he's going to be talking about three of his picks for his his favorite mutual funds we have just party from Morningstar and Josh how are you today. I am doing pretty well so let's talk a little bit about the first one is sent over. That TFS market neutral but let's let's just get some background on what exactly is a market neutral fund to begin with for people. Yeah the great question -- truck so market neutral as. That type of strategy attempt to be neutral to the market. So that both long and short a stock position. So so who might this be appropriate for in terms of on the investors that might be interest in this type of strategy. Despite the strategy is definitely more appropriate for someone close to retirement. Or someone looking to substitute some of their bond allocation. Now now what types of holdings is this going to have is assumed to be equity holdings bond holdings are a little bit of a Max. Mostly equity and mostly small cap -- for equity actually. So it's small cap equity but it has less volatility then a traditional small cap fund is that right. That's exactly right -- does substantially less volatility that they're small cap equity fund and the reason is because management hedges. It's a risk by shorting stocks. So was so in terms of this on what what I guess what what do you expect its from its performance over the next couple years it is -- -- you you know looking for you know to outperform the market or just give someone a nice conservative approach to equities. Well as a five star rated fun and it's five star fund because it's risk adjusted returns are superior to all the market neutral. Funds and are in -- space. Over the next couple years and over the last couple years we've pretty much. Expect this category turned in the mid single -- single digit. Okay so it's not gonna you know get it to point -- 45% a year but it's also gonna get you more than you know maybe two or 3% in a conservative bond fund right now. Right that's exactly correct or were trying to. -- investors to better better than just bond allocation. Okay so that is the that is the TFS. Market neutral fund and if your interest in that the ticker for that is TF -- MX -- if you wanna take a look at it so lot of good information up on Morningstar and -- get the next one that we're talking about is the the Merck hard currency fund and tell us a little bit about this fund. So we get a lot of input into the -- currency space that recently and basically what mark doesn't want a lot of current defense do -- tend to be inverse of the dollar. So they invest in hard currency currencies that are not undergoing substantial. Quantitative easing and actually done quite well compared to the -- dollar index. And an even like let's let's talk about right now we're we've seen the dollar strengthened quite a bit over the last couple months in particular. Against the Euro how how was it held up during a time like this. May -- it will it will go down when the dollar appreciates that's correct but. To promote your listeners out there most of their assets are dominated in US dollars in the paid in dollars you without checking account. So that's fun it's really meant to be diversify there. So you see this kind of as a compliment and someone's -- -- certainly not gonna make this a mainstay but. Maybe if you wanna throw you know five to 10% in here just is a little bit of hedges that is that how you view this a little bit. It is exactly it's that the dollar -- Okay so the certainly I think -- between those two funds we have you know such as uninteresting strategies -- can complement. You know way a broad based portfolio but let's talk about this third fund that you mention now and this is the the gateway fund what what exactly is the the perspective how what exactly is the the -- bedrock principle that this fund is based on. So this is actually have one of those oldest under the long short category and stepped in 1977. And more expert at the silver rating on the fund. And basically this is like hedged equity like strategy to management side and underlying basket of a securities. And the cell calls and nobody put option. So this is it's a little bit more exotic options for folks but what kind of performance I guess can they expect with all of that movement going on inside of -- Well certainly speed in the the long trip equity category in 2011 at one of 3% -- actually did beat. The F and 500. We've seen the you know mid single digit returns for the time. And is that pretty much what you can expect going forward again it's not gonna hit a home run but it's gonna give you a solid consistent performance is what you're looking at. Correct the volatility has hit in. You know has been -- was phenomenal and very low. And in terms of this one is is there any type of expense -- front -- Bakken load associated with us. No there isn't but it did we do like it because it's one of the cheapest under the category expense ratios point 94%. So significantly lower than a lot of other funds there and that might contribute to some of the performance. That you see again any money that you save on fees it's money that's going back in your portfolio. Take a fact that we always trying to pinpoint investors to the cheapest funds available. Already -- Josh we appreciate the help and we'll certainly take a closer look at those over the next a little bit and see if -- appropriate you know for someone to be investing in. -- already that was just -- from Morningstar and coming up we are going to have the winner. Of the gas starts to stick around for that announcement coming right up on the financial exchange I'm -- not a filling -- for Barry Armstrong.