Wednesday, April 16, 2008

* Who is Charles Mangum and Why Should We Listen to Him?

A 2003 CNN-Money article described Charles Mangum as such:

As the son of a Merrill Lynch broker, Charles Mangum has always been fascinated by the market. At age 14, he bought a few shares of convenience-store chain Circle K and watched his investment double. "I thought, 'This is so much fun,'" says Mangum.

A few years later, he suffered his first loss when another of his picks, Nichols Oil, went bankrupt. Mangum was unfazed. "It didn't change my view of stocks," he says. "I knew I loved investing."
In 1990, Charles joined joining Fidelity Investments and worked as a research analyst and portfolio manager. Since January 1997, he has worked as vice president and manager of Fidelity's Dividend Growth Fund (Prospectus) and also manages other Fidelity funds.

His investment philosophy is to find mature growth stocks that tend to be less risky and stronger financially. The emphasis on strong balance sheets steered him clear, for the most part, of tech bubble in the late 1990's. His portfolio is typically concentrated in health-care, consumer and financial stocks, mainly large-caps and midcaps. That is not to say his fund does not take chances. Charles makes concentrated bets by scooping up troubled but financially strong companies.

Charles is now 42 years old and according to a recent Motley Fool article, the Fidelity Dividend Growth fund has beaten 80% of its peers over the past decade. The article goes on to say:

Like you and me, Mangum is in pursuit of the ultimate dividend stock -- the stock that will leave investors set for life. And having trailed his competition in recent years, Mangum is hungry -- and looking for a promising stock that the market's turned its back on.
And just what is this stock? It is Bank of America (BAC). The above article notes several important facts about BAC:
  • The entire financial sector is currently out of favor
  • The company absolutely dominates U.S. retail banking
  • It is currently paying a dividend of around 7%
  • It has a solid balance sheet. BAC sold off its sub-prime business a while back, and credit appears under control
In my opinion (see Disclaimer), the day will come when we will look back at this time and wish we had bought more quality financial stocks - the key is finding quality in these sometimes murky waters.

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