Dodge & Cox is an outstanding wealth management firms in the fund industry, with a long track record of success. The company's management team tends toward a collaborative approach with a wide idea generation process. Dodge & Cox managers are also invested in their funds and, therefore, have a strong incentive to maximize shareholders' returns. The company has been recognized numerous times by mutual fund analytics firm Morningstar as an exemplary firm, and three of its core funds have earned five-star overall ratings from Morningstar. We take a look at them here.
- Dodge & Cox is a well-known actively managed mutual fund company, offering a range of investment products.
- Among its mutual fund family, three come very highly rated, earning 5-stars from Morningstar, Inc.
- Here, we look at three of these funds: The Dodge & Cox Balanced Fund, Stock Fund, and Income Fund.
Dodge & Cox Balanced Fund (DODBX)
With $14.4 billion in assets under management (AUM) as of March 16, 2020, the Dodge & Cox Balanced Fund seeks regular income and, to some extent, capital appreciation by investing in a mix of equity and debt securities. The fund does not take a typical 60% stocks, 40% bonds approach. Rather, it can hold anywhere from 25% to 75% of its assets in stocks. In March 2020, the fund had around 2/3 of its assets allocated to common stocks, while bonds had a 1/3 allocation. The highest concentration of assets was in the financial sector at 26.5%. The fund typically holds large-cap, high-quality stocks, and its bond holdings are mostly investment-grade.
While the fund's returns are above average, its opportunistic approach in taking higher equity stakes can create higher volatility than one would see with an all-bond fund. From March 2010 through March 2020 the fund produced a 7.7% average annual return and an 9.31% standard deviation, which resulted in an unfavorable 10-year Sharpe ratio of 0.35. The fund has an expense ratio of 0.52% and requires a minimum investment of $2,500.
Due to its strong long-term track record, consistent investment process and low fees, the fund has earned a five-star overall rating from Morningstar.
Dodge & Cox Stock Fund (DODGX)
The Dodge & Cox Stock Fund had $64.9 billion of AUM as of March 16, 2020, and invests in a diversified portfolio of large-cap common stocks that show value characteristics. Its greatest concentrations were in financials and healthcare stocks, at 26.1% and 23%, respectively. Management is known for taking contrarian positions in disliked stocks that sometimes pay off well. With a turnover rate of 17%, the fund is active but still tax-efficient.
The Dodge & Cox Stock Fund employs a consistent investment approach that outperforms major indexes, such as the S&P 500 Index and the Russell 1000 Value Index, in the long run. The fund demonstrated an 8.89% average annual return from March 2010 through March 2020, and a 14.57% 10-year standard deviation, resulting in a Sharpe ratio of just 0.27. The fund has a five-star rating from Morningstar, a low net expense ratio of 0.52% and charges no load fees, but requires a minimum of $2,500 invested.
Dodge & Cox Income Fund (DODIX)
With $66 billion of AUM as of March 16, 2020, the Dodge & Cox Income Fund seeks high and stable current income by investing in a diversified portfolio of high-quality fixed-income securities. About 57% of the fund's assets had AAA ratings in March 2020, and 27.5% of its bond holdings were rated BBB. The fund had an average duration of 4.3 years and a 2.75% 30-day SEC yield.
Like other Dodge & Cox funds, the Dodge & Cox Income Fund employs a time-tested investment approach that works well over the long term. The fund generated a 4.16% average annual return from March 2010 through March 2020, and a 2.18% standard deviation, producing a 1.47 Sharpe ratio. Morningstar has awarded the fund an overall five-star rating, and it has no load fees and comes with a 0.42% net expense ratio and $2,500 minimum investment.