Vanguard Windsor Fund (VWNFX) is a well known conservatively managed fund. Morningstar characterizes it as large value fund. The fund’s investment philosophy is to seek long-term capital appreciation and income. The fund invests mainly in mid- and large-capitalization companies whose stocks are considered by an advisor to be undervalued. Undervalued stocks are generally those that are out of favor with investors and that the advisor feels are trading at prices that are below average in relation to such measures as earnings and book value. These stocks often have above-average dividend yields. Thus, the fund can be categorized as a dividend stock fund.

As of 12/31/2012, the fund’s holdings have the following ratios:

Averages VWNFX Category Avg
Price/Earnings 10.65 10.81
Price/Book 1.64 1.56
Price/Sales 1.09 1.11
Price/Cashflow 6.21 7.03
Median Market Cap 45.62K 53.47K
3 Year Earnings Growth 2.54% 0.78%

From the above table, one can see that the fund has lower Price/Earnings (PE), P/S (Price/Sales) and Price/CashFlow than the averages of large value stock funds.

The fund has done reasonable job in the last ten years, beating both S&P 500 and the large value stock funds’ average in terms of returns. The following shows the fund’s recent performance, compared with two diversified ETF asset allocation portfolios with 0 risk profile (meaning 100% can be allocated into risk assets such as stocks):

Portfolio Performance Comparison

Portfolio/Fund Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe
Retirement Income ETFs Strategic Asset Allocation Risk Profile 0 1% 12% 29% 111% 2% 1%
VWNFX 5% 15% 24% 98% 0% -4%
Retirement Income ETFs Tactical Asset Allocation Risk Profile 0 -1% 1% 14% 69% 10% 43%

Portfolio Compare Link

Three Year Chart

Unfortunately, the fund lagged even the strategic asset allocation portfolio in the last 5 years. The fund did OK in the last one year period.

The following are the top holdings of the fund:

Top 10 Holdings (27.26% of Total Assets)
Company Symbol % Assets
ConocoPhillips Common Stock COP 3.58
Pfizer, Inc. Common Stock PFE 3.44
International Business Machines IBM 3.10
Philip Morris International Inc PM 2.96
Wells Fargo & Company Common St WFC 2.55
Microsoft Corporation MSFT 2.49
JP Morgan Chase & Co. Common St JPM 2.36
Johnson & Johnson Common Stock JNJ 2.33
Occidental Petroleum Corporatio OXY 2.29
American Express Company Common AXP 2.16

The takeaway is that the fund is worth watching, given its long term performance. However, recent performance has been lackluster.

See also

Fund Review: FPA Capital Fund Again In 30% Cash

Fund Review: Dividend And Growth Stocks Better in Foreign Large Cap Stock ETFs