January 21, 2012, Bob Brinker Increases Risk in Marketimer Portfolios

January 21, 2012.....Bob Brinker fans have known for years that Brinker recommends Vanguard Ginnie Mae Fund (VFIIX), but he has lowered holdings in that fund and increased the risk in his income and balanced portfolios.

 1. Brinker has told Moneytalk listeners that he  includes the Vanguard High-Yield Bond Fund (VWEHX) in his income portfolio and talked about how well they have done. 

 Last Sunday on Moneytalk, Bob Brinker told a caller that he added Double Line Total Return Fund to his income portfolio because he thinks that Jeffrey Gundlach is the best bond manager in the world today: ".....the fund has had an outstanding record. The reason for that, it is my opinion that the fund manager on that fund is the best there is out there in the world income investing....That's why I added that fund to my income portfolio." 

 2. Double Line is invested in 26%  BELOW-B  rated bonds.

 Another risk increase happened when Brinker  lowered the percentage of bond holdings in his "balanced" portfolio III by adding the Vanguard Wellesley Income Fund a year ago. 

 3. The Wellesley Fund is invested in 35% equities. That brings  Brinker's "balanced" portfolio to more than 50% weighted in equities.

 Now here in January 2012, Brinker increased risk in all three model portfolio by adding the Akre Focus Retail Fund (AKREX).

 4. Akrex Fund is more risky than the Vanguard Total Return Fund that it replaced because it lacks diversity.   It also breaks Brinker's 4% rule in most of its top-ten holdings -- the top-ten holdings represent 63% of total holdings, and  the top three are almost 10% of the fund. 

Brinker is  still very bullish and expects equities to do better than bonds this year: "My expectation is that right now, the equity portion, the equity portfolios are in a better position in terms of their total return potential than the fixed income..."

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September 14, 2011, Bob Brinker's Marketimer: Two Most Recent No-Load Fund Additions

September 14, 2011....So far this year, Bob Brinker has added two new mutual funds to his Marketimer off-the-books fixed-income portfolio (Brinker now calls that portfolio "income fund").

Firstly, in January, Bob Brinker added the Vanguard Wellesley Income Fund (VWINX).  Moneytalk,   February 20, 2011, caller-Josephine asked Brinker about the Wellesley Fund. From my summary of the call:

Josephine followed up by asking Brinker if the Vanguard Wellesley Income Fund (VWINX) was going to be "in the fixed part of his portfolio" or was it going to be "in the equity part of his portfolio."

Brinker replied: "That's a hybrid. We're using that as a hybrid. So the answer to your question is yes and yes. It is an income related security..... And that fund has done a great job in a conservative realm. That is a fund that is 62% in fixed income securities, and 38% in income-related securities, such as dividend paying stocks. So that makes it a hybrid........Personally, and I've said this before in the past, I think it's a well-managed fund."

The Vanguard Wellesley Income Fund has been doing okay since Brinker recommended it. Possibly because it is mostly invested in bonds and dividend paying stocks.  It was  priced at $21.70 when he made the recommendation, and today it closed at $22.25. It also pays a 3.2% dividend according to the Vanguard website.  


The second fund that Brinker added this year was the Double Line Total Return Fund (DTLNX), which is managed by Jeffrey Gundlach.   Moneytalk, May 15, 2011, caller-Bill  asked Brinker about the new fund. From my summary of the call:

* Caller Bill from Wisconsin said: "In your last issue of Marketimer, you made a change in the income portfolio, going to a brand new fund. Double Line Total Return and it looks to me like....."

Brinker interrupted: "Bill did you read page 3 of that issue? ....I've explained in there why I selected that fund. It's right there."

Bill continued: "Yes, I have it right it front of me. Let me ask a couple of questions that aren't there. One, it's a very short life fund. It's only been around a year or less, and it has a higher expense ratio. And I assume the rating isn't as good as the funds that it replaces. And I question what the duration would be on that fund."

Brinker replied: "Now this is a change that was made in the income portfolio. Now if you check that data that I published in the letter, you will see that I published the duration. Did you see that? You don't see any information on the duration?"

Bill: "No sir."

Brinker said: "That's because it was effective on the 10th of May. Let me explain why you didn't find the duration, and you will find the duration. The duration is in the table on page 7, but that table does not include the fund because the change wasn't made on April 30th. Everything in the newsletter for May is as of April 30. So what I've done is, I've stated in that recommendation to make those changes in the income portfolio in page 7 ..... that those changes take place on the close May 10th. So they happened last Tuesday....We implemented those changes..... for performance purposes......So when we publish the June investment letter, on page 7, you will see the duration of that fund in there........"

Brinker continued:  "Now as to why I selected that fund. I selected that fund because I really like that manager. I think that manager has really outstanding talent. Actually, I stipulate that on page 3 of the newsletter, that I like the manager. And that was the reason that I selected that fund. Now although what you said is true that it's a relatively new fund. It started in the spring of 2010, its done very well its first year out there. Now here's the thing, that manager had a long-term track record at his prior fund. A record of over ten years of excellence in income management at his prior fund. I looked at that record, looked at what he's done the first year in his new fund since he's gone out on his own, and was very pleased at the data I was looking at. And that was the reason that I selected it.....Remember though, if you see a recommendation that doesn't work with you investment, don't buy it...... But I have to go with what I believe in the investment letter because of performance tracking.....and that was the analysis that I based that recommendation on. Good call, Bill. I appreciate it. This is Moneytalk."

The Double Line website lists the fund duration at 3.35.  The fund sold for $11.08 on May 10th, when Brinker first recommended it. It closed at $11.27 today. Its yield is  about 8.43%.

My sister-in-law and brother are vacationing in McCall, Idaho.  She sent this picture of McCall Harbor. Click to enlarge - very beautiful:

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