In October of last year, Mark Oelschlager was interviewed by industry writer John Heins for Value Investor Insight.  The interview was interesting at the time, but you might find it even more informative today, thanks to the benefit of a rearview perspective.

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It also seems an appropriate time to comment on the growth vs. value dynamic, given the publication’s title containing the word “value” and the recent decision by Morningstar to move Towpath Focus Fund (TOWFX) from its Large Blend category to Large Value.  Throughout his career Mark has expressed that it is inaccurate to label him as either a growth or value manager because his flexible approach allows for both.  This has led to maintaining positions in growth stalwarts such as Amazon, Alphabet, and Facebook (all current holdings) as well as companies with lower valuations.  We believe this flexibility enhances long-term returns for our clients.

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For example, in 2020 when interest rates plummeted and the premium placed on growth stocks spiked, it compelled us as long-term investors to adjust the positioning of the portfolio in the direction of “value.”  This didn’t mean that we had changed our stripes; it simply reflected our discipline being put into practice.  If we had not done this – and not increased our trading activity to take advantage of the unusual market conditions – the returns for our clients would have been nowhere near as strong as they were over the past 6-12 months.

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As Mr. Heins writes in his interview, “Successful long-term investors have to find the right balance between flexibility and discipline.  Oelschlager Investments’ Mark Oelschlager has proven to walk that line exceedingly well.”

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This adaptability to invest in both “value” and “growth” stocks might sound logical, but it confounds industry analysts who prefer to place portfolio managers into tidy boxes and expect them to select stocks only in those boxes.  The change in composition of our holdings during the pandemic led to the recent re-categorization by Morningstar.  This category change has no bearing on how we invest, and it shouldn’t have any impact on how a client or potential client views us.  Our goal is to outperform the broader market, not a narrower benchmark that is selected by a third party.  Mark strives to do this, as he always has, by investing with a long-term mindset, in companies that have sustainable competitive advantages and are trading at reasonable prices.  Whether such stocks are categorized as growth or value is irrelevant to us – and presumably to you.


 

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Best regards,
Oelschlager Investments

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IMPORTANT INFORMATION:

Mutual fund investing involves risk, including loss of principal. The value of the Fund’s investments will vary from day to day in response to the activities of individual companies and general market and economic conditions.

 

Past Performance Does Not Guarantee Future Results. The performance data quoted represents past performance, and current returns may be lower or higher. The investment return and net asset value will fluctuate so that shares, when redeemed, may be worth more or less than the original cost. To obtain performance current to the most recent month-end, please call 877-593-8637.
 

An investor should consider Towpath Focus Fund’s investment objectives, risks, charges and expenses carefully before investing. This and other important information about the investment company can be found in the Fund’s prospectus and summary prospectus. To obtain a prospectus or summary prospectus, call 877-593-5637. Please read the prospectus carefully before investing.

 

The statements and opinions expressed in the article reprint are those of the author and do not represent the opinions of Oelschlager Investments or Ultimus Fund Distributors, LLC. All information is historical and not indicative of future results and is subject to change. Reader should not assume that an investment in the securities mentioned was profitable or would be profitable in the future. This information is not a recommendation to buy or sell.

Morningstar large-blend funds are fairly representative of the overall U.S. stock market in size, growth rates, and price. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large cap. The blend style is assigned to portfolios where neither growth nor value characteristics predominate. These portfolios tend to invest across the spectrum of U.S. industries, and owing to their broad exposure, the portfolios’ returns are often similar to those of the S&P 500 Index.

 

Morningstar large-value funds invest in stocks of big U.S. companies that are less expensive or growing more slowly than other large-cap stocks. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large-cap. Value is defined based on low valuations (low price ratios and high dividend yields) and slow growth (low growth rates for earnings, sales, book value, and cash flow).

 

Top 10 Holdings as of 3/31/2021:  Alphabet 5.5%, Bank New York Mellon 3.9%, Charles Schwab 3.7%, Prestige Consumer Healthcare 3.2%, Herman Miller 3.0%, AmerisourceBergen 3.0%, GlaxoSmithKline 2.8%, Valero Energy Corp. 2.8%, Amgen Inc. 2.8%, Atlantic Union Bankshares 2.8%.  Current and future portfolio holdings subject to change.

 

Towpath Funds are distributed by Ultimus Fund Distributors, LLC (Member FINRA). Ultimus Fund Distributors, LLC and Towpath Funds are separate and unaffiliated.