Two fund managers who've been the toast of Wall Street in 2022 told us how they've built a working 25-year partnership and consistently won at stock picking
John Bailer and Brian Ferguson run two of the best stock funds of 2022, and they told Insider about their quarter-century working relationship.
John Bailer, one half of a dynamic investing duo.BNY MellonSometimes opposites attract, but sometimes being two of a kind works out even better.BNY Mellon mutual fund managers John Bailer and Brian Ferguson belong in the second camp. For the past 25 years they've worked together as analysts and mutual fund managers, sharing an approach to investing that's proven very successful. In fact, they just had one of their best years ever.Bailer's first job after college was at The Boston Company, which was acquired soon after by Mellon.
He worked in a series of different roles, and by the end of the decade he was working as an analyst covering telecom, media, and tech stocks.By then, the company had also hired Ferguson as an analyst covering small- and mid-cap stocks. Over time they started to collaborate more closely thanks to their shared approach to value stocks. "In 2000, I launched a portfolio called Mid-Cap Plus," Ferguson told Insider in a recent interview.
"It was really there starting in 2000 where our working relationship really accelerated." In time, the two began working together on coverage of large cap value stocks as well.At the end of 2003, Ferguson took one of the roles he holds today as the lead manager on what's now the BNY Mellon Dynamic Value Fund. He also became the leader of a series of related institutional accounts. The following year he took a lead role running other income-oriented large-cap products.Meanwhile, Bailer became the lead on the dividend- and dividend-growth stock portfolios.
"We decided John should be the lead of those dividend/income products," Ferguson said. Bailer has run the Income Stock Fund since the end of 2011.At the end of October, both were among the 10 highest-returning stock funds of 2022, according to Kiplinger.Brian Ferguson, the other half of a dynamic investing duo.BNY Mellon Making an investing partnership workFerguson told Insider that the partnership works because they're like-minded, believe in their firm's investing style, and don't mind being wrong."We also both share an intense intellectual curiosity, and that allows us to continue to challenge ourselves, be open to challenges from all the other investment resources around us, and always be on the lookout to do things better and smarter," he said.Morningstar data shows that both have out-returned more than 90% of similar funds over the last 10 years. The two funds use generally similar approaches, as they both aim to buy underpriced stocks with strong business fundamentals that are positioned for a turnaround that will boost their prices.The Income Stock Fund has one additional criterion: the fund prioritizes dividends that are at least 50% greater than the yield of the average S&P 500 company.
But the investment process is otherwise similar, and Ferguson and Bailer both say their strategy has proven its worth over time."We both bought into what our original philosophy was 30 years ago, which was this combination of buying companies with good intrinsic value, buying companies with improving momentum and quality fundamentals," Bailer said. "Having that philosophy and really believing in it helps you make the right decisions and stick with that philosophy when times are really tough, because we know it has worked over so many years." The Dynamic Value Fund holds 75 stocks and the Income Stock Fund has more than 50, and Ferguson says that diversification reflects the fact that they know they won't always be right."We can really lean on the tenure of the team and that philosophy and the process that we've been in charge of implementing since taking over these portfolios," Ferguson said.Read the original article on Business Insider