Published September 8th, 2016 by Ben Reynolds
The investing industry makes money when you take action.
Buying and selling drives fees and commissions. Buying and holding individual securities doesn’t.
Mutual funds themselves can have high portfolio turnover ratios. The average large cap growth mutual fund has a portfolio turnover ratio of 97%. This means nearly the entire portfolio is bought and sold every single year.
Activity should not be confused with results, however.
There is one fund that has not purchased any new stocks since 1935. The Voya Corporate Leaders Trust Fund (LEXCX). The funds description and performance is shown below.
Source: Voya Investment Management
Voya Corporate Leaders Fund Holdings
The Voya Corporate Leaders Fund doesn’t buy individual securities (other than to make adjustments when investors buy into the fund).
Despite not buying new securities the individual securities in the Voya Corporate Leaders Fund have changed over time.
This is due to spin-off and mergers. Today, there are just 22 stocks in the Voya Corporate Leaders Fund. Many are among the ‘bluest’ of blue chip stocks. All 22 holdings of the fund are listed below:
- Ameren (AEE)
- AT&T (T)
- Berkshire Hathaway (BRK.A) (BRK.B)
- CBS (CBS)
- Chevron (CVX)
- Columbia Pipeline Group (CPGX)
- Comcast (CMCSA)
- Consolidated Edison (ED)
- Dow Chemical (DOW)
- DuPont (DD)
- Exxon Mobil (XOM)
- Foot Locker (FL)
- Fortune Brands Home & Security (FBHS)
- General Electric (GE)
- Honeywell International (HON)
- Marathon Oil (MRO)
- Marathon Petroleum (MPC)
- NiSource (NI)
- Praxair (PX)
- Procter & Gamble (PG)
- Union Pacific (UNP)
- Viacom (VIAB)
The company only sells shares when a company goes bankrupt or if the dividend is suspended.
The dividend suspension rule is similar to one of the two sell rules in The 8 Rules of Dividend Investing. Specifically, the rule to sell a holding if it reduces or eliminates its dividend.
The original 1935 holdings of the fund are listed below:
- Allied Chemical & Dye
- American Can Company
- American Radiator & Standard Sanitary
- American Telephone & Telegraph
- Columbia Gas & Electric
- Consolidated Gas Company of New York
- I. DuPont de Nemours & Company
- Eastman Kodak Company
- W. Woolworth Company
- General Electric
- International Harvester
- National Biscuit
- Otis Elevator
- Pacific Gas & Electric Company
- Sears, Roebuck & Company
- Socony-Vacuum Oil Company
- Standard Oil Company (New Jersey)
- Standard Oil Company of California
- The American Tobacco Company
- The Atchison, Topeka & Santa Fe Railway
- The Borden Company
- The New York Central Railroad Company
- The North American Company
- The Pennsylvania Railroad Company
- The Procter & Gamble Company
- The United Gas Improvement Company
- Union Carbide & Carbon
- Union Pacific Railroad Company
- United States Steel
- Westinghouse Electric & Manufacturing
A few names remain the same 81 years later: Procter & Gamble, General Electric, Du Pont, and Union Pacific. Most of the funds current holdings are from spin-offs and mergers.
Miscellaneous Note: Companies with the words ‘American’ or ‘United States’ in their names have certainly fallen in popularity. Is this a sign of declining patriotism, increased globalism, or both?
You can see a full history of what companies from 1935 became the 22 companies of today at this link (pages 3 and 4).
Performance of the Voya Corporate Leaders Fund
What is absolutely remarkable about the Voya Corporate Leaders Fund is its historical performance. The fund has outperformed the market over the last 40 years without adding picking new securities to buy.
Outperformance with no activity shows that most active managers are spinning their wheels without providing any value. The Voya Corporate Leaders Fund’s performance reminds me of the following Buffett quote:
“Benign neglect, bordering on sloth, remains the hallmark of our investment process.”
The inactivity of the Voya Corporate Leaders Fund would make even Buffet blush. Investing is not a game where activity helps. The more you trade, the worse your returns will likely be.
It’s not just over the very long-term that the Voya Corporate Leaders Fund has outperformed, either:
- 1 Year annual total returns of 16.9% versus 12.6% for the S&P 500
- Year-to-date total returns of 13.3% versus 7.8% for the S&P 500
The financial media is built to promote buying and selling. Don’t fall into this trap.
Churning your account makes it more difficult to outperform (or match) the market because you generate higher frictional costs – which add up over time.
Great businesses tend to stay great for long periods of time. Selling them is like slaughtering a golden egg laying goose for food. It’s not a good idea.
The Voya Corporate Leaders Fund knew this in 1935. The Fund has performed better than the market over the last 40 years. It has likely outperformed over 80 years, although performance data for this first 40 years of the fund is not available.