Mechanical Engineering alumnus Mark Notkin (B.S. ’86) has brought off an enviable coup during an unenviable time in the stock market. Notkin was the manager of 2009’s best-performing high-yield-bond fund, Fidelity Capital & Income, according to a recent article in Kiplinger's Personal Finance magazine (motto: “timely, trusted personal finance advice & business forecasts”). As the article reports, “From the time he took the fund’s helm in mid 2003 through January 14, it returned 9.6% annualized, beating more than 99% of its peers.” To borrow an old phrase from a competitor’s ads: When Notkin talks, people listen.
That’s why it’s noteworthy when Kiplinger’s reports that Notkin is optimistic about our economic future. “I think the economy will slowly heal itself over 2010 and will return to a slow-growth environment,” he predicts. Recent indicators in Massachusetts, at least, back up Notkin’s prognostication, as some experts are now declaring that the Commonwealth has emerged from the recession.
How did Notkin achieve such a shiny record with Fidelity Capital & Income? The Kiplinger’s article reports that recently he has been selling some of his junk-bond holdings and redeploying cash to stocks. The reason for Notkin’s moves is plain: “Valuations in the high-yield market look full,” he says.
“Notkin tends to be more aggressive than the typical junk-fund manager,” reports writer Elizabeth Ody, “venturing into the lowest-rated bonds and into deeply subordinated debt (bonds whose holders, in a bankruptcy scenario, are last in line to be paid).”
But he can also position the fund defensively and allow cash to build -- as he did in 2008, when cash holdings peaked at 20% of assets by the end of the year. That helped to contain 2008 losses.
“That also meant he had dry powder to put to work in early 2009,” says Ody’s article, “allowing him to add to junk holdings when prices were near bottom. The fund gained 72.1% for the year, well ahead of the average junk-bond fund’s gain of 46.8%.”
What tips from Notkin can investors take to the bank? Well, according to Ody, “Notkin likes high-yield bonds that benefit from global growth, such as technology- and commodity-sector bonds. Domestically, he likes industries in which production has fallen to such catastrophically low levels that it has nowhere to go but up. That’s leading him to bonds of homebuilders and automakers.”
Notkin also has a tip for his fellow College of Engineering alums. Invest in our students. He followed his own advice recently by donating $10,000 to the college’s scholarship funding.
“I think state universities give an invaluable service by providing relatively affordable education to many. There are some ambitious kids out there with a strong desire to learn and who truly appreciate the value of an education. Funding scholarships provides opportunities to deserving students to get an education they might otherwise not be able to afford. I am a big believer in the importance of education, and funding these scholarships is a great investment in our country's future.”
Remember: When Notkin talks….
If you want to invest in scholarships for College of Engineering students, please link here: www.umass.edu/give. (March 2010)