As investors flock to mutual funds as a flight to safety in this tough market, Cramer welcomed on Friday’s show Chuck Akre, the manager of the FBR Focus Fund , one of Cramer’s favorite mutual funds with an amazing five-year average annual return of over 20%.
Akre’s fund is made up of stocks like Toll Brothers and CarMax that require a degree of optimism about the American consumer. Akre defended both those beleaguered stocks to Cramer, saying TOL has the best balance sheet of the homebuilders, a “killer” management team, and is selling at about 80% of book value whereas the rest of the group is around two-thirds of book.
CarMax, Akre said, also benefits from a strong management team as well as visibility and a sturdy business plan over the next decade. Even with auto sales declining and the domestic automakers facing a turbulent economy, Akre said he is confident the longer-term trend will remain higher for used and new car sales and CarMax will ride it all the way up.
Akre was surprisingly sanguine about the state of the stock market, telling Cramer that “we’ve been waiting for this market for years.” Akre’s view is that the steep correction in equities has created opportunities for bargain hunting. He recommended buying on a scale, a technique Cramer often repeats. Akre’s FBR fund was made up of astounding 35% cash in July right before the mortgage crisis worsened. Even now, the fund is 15% liquid, which Cramer noted was unusual for any mutual fund but a sign of protection against market risks.
For the people who ended this week down 5%, thinking about cashing in what’s left and leaving the table until there’s a rebound, Akre had this to say:
“This is the time when you create value for the next half-dozen years.”
That’s exactly the way to look at it, Cramer said. “This fund gets it.”
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