Mutual Funds

MutualFunds.com: It's been a solid and steady year for the Becker Value Equity Fund (BVEFX). In a world where investors have scrambled for yield, it appears the fund has identified numerous opportunities that offer a bit of value and yield, specifically top holdings Microsoft (MSFT), Pfizer (PFE), and JP Morgan (JPM). Are you content with where the... stocks are currently trading and would you say these names are core examples of what you look for? Mike McGarr: Of the three stocks you mention, only Microsoft (MSFT) would be considered close to fully-valued under our disciplines. The renewed emphasis on sound capital deployment, including dividends, by their new CEO, Satya Nadella, has certainly rewarded shareholders this year. Nevertheless, the valuation is now less compelling, and the company faces more challenging comparisons over the coming year. We have not been adding to our position of late. Pfizer (PFE) and JP Morgan (JPM) remain core positions in the Becker Value Equity Fund, and we would not be averse to adding to those positions at current levels. Both are good examples of what we look for in our investments: companies with compelling valuations, robust balance sheets, strong records of return on invested capital and a disciplined approach to capital deployment. MutualFunds.com: There are plenty of areas where value doesn't appear as attractive when it comes to current valuations. Utilities, tobacco, and airline names are starting to bump above levels that normally raised red flags for value-focused managers. Do you think these sectors are getting pricey and where else would you say investors may want to exercise caution? Mike McGarr: Utility shares are one area, as you suggest, where investors looking for a return in a yield-starved market have taken valuations to levels that are expensive given their limited growth prospects, capital spending needs, and regulatory challenges. We're down to just one electric utility, Xcel Energy (XEL), and consider it more of a source of funds for new and more ...Read More