Christopher Davis, co-manager of the Davis New York Venture Fund, says he purchased shares of JPMorgan Chase because the bank's newly appointed...
Christopher Davis, co-manager of the Davis New York Venture Fund, says he purchased shares of JPMorgan Chase because the bank’s newly appointed chief executive knows how to outperform the market.
James Dimon, named recently to succeed William Harrison as CEO, is “a manager that has a very strong record of producing good results and communicating honestly with investors and employees,” he said.
Davis first bought shares of JPMorgan, the No. 3 U.S. bank, after Dimon joined in the third quarter of 2004. He said Dimon, along with Progressive’s Peter Lewis and Golden West Financial’s Herbert and Marion Sandler, may help his fund extend its lead over the Standard & Poor’s 500 Index
“Those are managers who have built records that are among the best on the New York Stock Exchange for decades,” said Davis, 40, who followed his father and grandfather into the money-management business. His New York-based firm oversees $60 billion for clients.
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The Davis fund rose at an annual rate of 4.3 percent since 2000, exceeding the 1.5 percent decline of the S&P 500, as of Oct. 26. JPMorgan has held back the gains by losing 0.9 percent, including dividends, since the Bank One acquisition was completed in July 2004.
Investments in JPMorgan, Progressive and Golden West account for 11 percent of the Davis fund’s $31.4 billion of assets. Davis’ firm is the third-largest investor in Progressive, an insurer in Mayfield Village, Ohio, and the biggest holder of Oakland, Calif.-based Golden West, a savings bank and fund manager.
The Davis New York Venture Fund, started in 1969, has risen 5 percent this year (as of Oct. 26) and the S&P 500 lost 0.3 percent, including reinvested dividends, during that same period.
The return ranks seventh of 24 U.S.-based stock funds with at least $25 billion in assets, data compiled by Bloomberg show. The $64 billion American EuroPacific Growth Fund, run by a team from Los Angeles-based Capital Group, is No. 1 with an increase of 7.4 percent.
Davis and Feinberg said the banks and insurers they’ve picked are attractive because their services are “unlikely to become obsolete.” They scout for balance sheets that show the wherewithal to withstand recessions, and pick stocks with a low price relative to earnings after adjusting for noncash expenses.
The preference for financial stocks dates to Davis’ grandfather, Shelby Cullom Davis, who invested $100,000 in insurers in 1947 when he was 38. By the time he died in 1994, the sum had grown to almost $900 million, according to John Rothchild’s book, “The Davis Dynasty.”
His father, Shelby M.C. Davis, spent 28 years at the helm of the New York fund. He beat the S&P 500 during every 10-year period, winning by an average of 3.5 percentage points a year.