CHICAGO, IL -- (Marketwire) -- 10/12/10 -- During the three year period ending September 30, 2010, the Appleseed Fund (NASDAQ: APPLX) has generated a 7.5% annualized return, versus a market annualized return as measured by the S&P 500 Index of (-7.2%). As a result, Appleseed remains the top performing mid-cap value fund among 345 funds during that three year period, according to Morningstar.
Appleseed Fund, an equity mutual fund which invests in sustainable, undervalued companies, took advantage of a rising but volatile stock market by selling Merck (MRK), whose stock appreciated during the third quarter, and by trimming its positions in Annaly Capital Management (NLY), Novartis (NVS), and PetSmart (PETM). As a result, the Fund's cash position increased since the end of the second quarter. At the same time, the portfolio managers believe that the stocks of several large-cap, high quality companies, such as Johnson & Johnson (JNJ), remain significantly undervalued.
"Many valuations in today's market simply do not reflect today's reality of weak economic fundamentals and tepid company growth prospects," explained Bill Pekin, the Fund's co-portfolio manager. "Without a sustainable economic recovery in sight, disciplined investors can still generate attractive investment returns by investing in undervalued companies and selling those companies once their stock price appreciates. However, selectivity is incredibly important when choosing stocks in this environment.
"We continue to see investors swing between bouts of unsubstantiated optimism, offset by periods of unbridled skittishness and concern about the true state of the economy. This manic state has resulted in market volatility and irrational trading and pricing. As long-term, disciplined value investors, we remain focused on fundamental analysis and on those rare opportunities to purchase mispriced stocks that can generate outsized investment returns. Equally important, we are avoiding sectors where valuations appear to us to be irrationally optimistic."
In the third quarter 2010, the Fund's managers continued to pursue a defensive approach to investing by maintaining and selectively adding to holdings whose intrinsic value they believe should increase in a weak economy. Such defensive holdings include pharmaceutical companies like Pfizer (PFE) and Novartis, healthcare services companies like PDI Inc. (PDII) and Albany Molecular Research (AMRI), and consumer staples producers such as John B. Sanfilippo (JBSS). In addition, with a significant cash reserve, Appleseed remains poised to take advantage of market opportunities that could surface in a market correction.
The Fund announced in July it would not invest in too-big-to-fail banks due to the systemic risk that they continue to represent. Pekin noted the positive response that Appleseed has received from current and prospective investors as a result of the Fund's new screen. "The continuing subsidies that the Treasury and the Fed provides to the too-big-to-fail banks create an impediment to sustainable long-term economic growth. In addition, with over $250 trillion in derivatives on the balance sheets of the top five banks as of the end of the second quarter, representing nearly twenty times annual U.S. GDP, we concur with Paul Volcker who recently said that the growth of derivatives has far exceeded any pressing need for hedging."
About the Appleseed Fund:
- Appleseed Fund manages $126 million.
- Appleseed Fund (APPLX) was ranked by Morningstar as the #1 returning U.S. midcap value fund among 345 funds for the three years ended September 30, 2010, generating a return of 7.5% compared with the benchmark S&P 500 return of -7.2% during the same period.
- Morningstar rates Appleseed as a five-star mutual fund overall as a result of Appleseed's risk-adjusted performance.
- Since its inception on December 8, 2006, Appleseed Fund has outperformed the S&P 500 Index by 10.2% per year, generating a total return of 6.9% annually compared with the S&P 500 Index's annualized return of (-3.3%).
- The Fund is managed by Pekin Singer Strauss, a Chicago-based value-oriented investment firm established in 1990. Appleseed Fund's portfolio managers are also Appleseed Fund shareholders.
- More information can be found on the Appleseed Fund website, www.appleseedfund.com.
- Through 9/30/2010, the Appleseed Fund generated a one-year return of 9.0% and an annualized return of 6.9% since the Fund's inception on 12/08/06. The Fund's past performance does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. The gross expense ratio of the Fund is 2.09%, and the net expense ratio after contractual fee waivers is 1.31%. The advisor has contracted with the Fund to waive fees to maintain a 1.24% expense ratio (excluding indirect expenses) for shareholders of the Fund through January 31, 2011.
- For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund's monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.) The Overall Morningstar Rating for a fund is derived from a weighted average of the performance figures associated with its three-, five- and ten-year (if applicable) Morningstar Rating metrics. Appleseed Fund was rated against the 345 U.S.-domiciled mid-cap value funds over the three years ended August 31st, 2010. With respect to these mid-cap value funds, Appleseed Fund received a Morningstar Rating of five stars. Past performance is no guarantee of future results.
- Albany Molecular Research represented 2.1% of the portfolio, Johnson & Johnson represented 5.0% of the portfolio, Annaly Capital Management represented 2.1% of the portfolio, Novartis represented 5.1% of the portfolio, PetSmart represented 2.0% of the portfolio, PDI Inc. represented 3.0% of the portfolio, Merck represented 0.0% of the portfolio, Pfizer represented 10.9% of the portfolio, and John B. Sanfilippo represented 6.0% of the portfolio on September 30, 2010.
- The S&P 500 Index is a widely recognized unmanaged index of equity prices and are representative of a broader market and range of securities than is found in the Fund's portfolio. The Index returns do not reflect the deduction of expenses, which have been deducted from the Fund's returns. The Index return assumes reinvestment of all distributions and does not reflect the deduction of taxes and fees. Individuals cannot invest directly in the Index, however, an individual can invest in exchange traded funds or other investment vehicles that attempt to track the performance of a benchmark index.
- Mid-cap investing involves greater risk not associated with investing in more established companies, such as greater price volatility, business risk, less liquidity and increased competitive threat.
- You should carefully consider the investment objectives, potential risks, management fees, and charges and expenses of the Fund before investing. The Fund's prospectus contains this and other information about the Fund, and should be read carefully before investing. You may obtain a current copy of the Fund's prospectus or performance data current to the most recent month end by calling 1-800-470-1029. The investment return and principal value of an investment in the Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.
- There is no guarantee that this or any investment strategy will succeed; the strategy is not an indicator of future performance; and investment results may vary. Distributed by Unified Financial Securities, Inc., 2960 North Meridian Street, Suite 300, Indianapolis, IN 46208. (Member FINRA)
Capital Insight Partners