Key Takeaways
Our confidence in the coming decade is driven by the durability, growth potential and attractive valuations of our businesses. Significant co-investment, experience, patience, a willingness to look different, and research rigor can result in successful active management. Davis has more than $2 billion invested alongside its shareholders. Nearly 50% of funds have zero. Only 12% have more than $1 million.1 Since 1969, Davis New York Venture Fund outperformed the market in 71% of all rolling five year periods and 94% of all rolling 10 year periods versus 41% and 37% for all large cap funds respectively.2
Since 1969, $10,000 invested in Davis New York Venture Fund compounded to $1,676,870 versus $773,867 for the S&P 500® Index.3 The chart below summarizes results through June 30, 2014 for Davis New York Venture Fund. As the Fund’s managers, we have two objectives: to earn a satisfactory absolute investment return and to generate relative results in excess of the S&P 500® Index. In our view, the data in the chart presents a mixed picture. Over the very long term, results are satisfactory on both counts. In the periods that include the 2000–2002 and 2008–2009 bear markets our relative results are mixed and our absolute results are below our standards. In shorter periods we have produced absolute returns in the mid teens but trailing relative results. We have ground to make up.
The performance presented represents past performance and is not a guarantee of future results. Total return assumes reinvestment of dividends and capital gain distributions. Investment return and principal value will vary so that, when redeemed, an investor’s shares may be worth more or less than their original cost. The total annual operating expense ratio for Class A shares as of the most recent prospectus was 0.88%. The total annual operating expense ratio may vary in future years. Returns and expenses for other classes of shares will vary. Current performance may be higher or lower than the performance quoted. For most recent month-end performance, click here or call 800-279-0279.
This report includes candid statements and observations regarding investment strategies, individual securities, and economic and market conditions; however, there is no guarantee that these statements, opinions or forecasts will prove to be correct. Equity markets are volatile and an investor may lose money. Past performance is not a guarantee of future results. 1Co-investment is as of June 30, 2014 and includes the Davis family, Davis Advisors, employees, and directors. Information for other funds is from Sara Max, “Fund Managers Who Invest Elsewhere,” Barron’s, July 12, 2014. 2Class A shares without a sales charge. Past performance is not a guarantee of future results. There is no guarantee the Fund will continue to outperform the market over the long term. See endnotes for a description of Outperforming the Market. 3Class A shares without a sales charge. Past performance is not a guarantee of future results. Hypothetical performance is since Fund inception on February 17, 1969. Outcomes vs Benchmarks “You can’t eat relative returns.”
At a recent shareholder gathering, a client asked which of the twin objectives described above is more important to us, generating a satisfactory absolute return or outpacing the S&P 500® Index. Our answer is unequivocal. We would rather generate a satisfactory absolute return. Two important facts provide the foundation of this answer. First, with more than $2 billion of our families’ and colleagues’ own money invested alongside our shareholders in the funds we manage, we always remember the wisdom of the old saying, “You can’t eat relative returns.”4
“Whether saving for retirement, a child’s education, or some other purpose, shareholders are entrusting their savings to us.”
The alignment of interests that comes from co-investment is central to our culture and rarer in the industry than we would have imagined. In fact, of the 7,700 funds tracked by Morningstar, nearly half are run by managers who do not have a single penny in their own funds and only 12% are run by managers who have more than $1 million invested alongside their shareholders.5
As portfolio managers, we find this data particularly shocking given the importance we place on insider ownership at the companies in which we invest, 100% of which are run by executives who have more than $1 million invested in the companies they manage.
The second fact underpinning our focus on absolute returns rests on our stewardship responsibility to Davis New York Venture Fund’s shareholders. Whether saving for retirement, a child’s education, or some other purpose, shareholders are entrusting their savings to us with the hope that we will be able to help them achieve their financial goals by growing the value of their savings over the long term. Knowing this, we would rather lag the S&P 500® Index by earning 11% when it earned 12% than beat the S&P 500® Index by earning 3% when it earned only 2%. Put simply, outcomes matter more than benchmarks.
4As of June 30, 2014. 5 Sara Max, “Fund Managers Who Invest Elsewhere,” Barron’s, July 12, 2014. Active vs Passive “Misperceptions about the S&P 500®.”
While achieving absolute returns is job number one at Davis Advisors, we remain confident that we can also achieve our secondary goal of generating relative results that exceed the S&P 500® Index and the passive funds that track that Index. Because our confidence flies in the face of conventional wisdom, the current mania for exchange-traded funds (ETFs) and index funds as well as our own recent performance, spending a few moments on our rationale for believing that we should be able to beat the S&P 500® Index over time is worthwhile.
To start with an analogy, while there is no question that the average person would be unable to climb Mount Everest, certain characteristics including fitness, preparation, perseverance, and patience make some people more likely than others to be able to accomplish this feat. Similarly, while many active managers underperform the S&P 500® Index over time, we believe certain characteristics make long-term outperformance more likely.6 These characteristics include an alignment of interests, significant experience, a willingness to look different, a long-term time horizon, a consistent and disciplined framework, and individual accountability. Not surprisingly, these characteristics are the defining features of our investment approach.
“We believe certain characteristics make long-term outperformance more likely.”
Because long-term results are the litmus test for any investment approach, the fact that we have generated satisfactory results since 1969 and that we have outperformed the S&P 500® Index in 71% of all rolling five year periods and 94% of all rolling 10 year periods lends support to our conviction.7
Another way to address the question of whether an active manager like us is likely to beat the Index is to take a closer look at the Index itself. Despite what many think, the S&P 500® Index is not a passive, unmanaged or fixed list of 500 companies. Rather, the Index is an actively managed portfolio that is regularly updated and modified based on the recommendations of a secretive committee at McGraw Hill Financial. Over the last 20 years, the turnover of this portfolio has averaged around 5% a year. This turnover means every year companies are added to or removed from the Index. In 2013, for example, 18 new companies were added and 18 were removed from the Index.
With that understanding in mind, the performance of the S&P 500® Index before expenses (more about expenses later) can be attributed to three different factors: what stocks are in the Index (stock selection), when stocks are added or removed (timing) and how much is invested in each stock (portfolio construction).
Starting with stock selection, any list of 500 companies is bound to include businesses that are structurally impaired or grossly overvalued. While some would disagree, we believe managers that use careful research and long-term judgment are able to add value by avoiding at least some of those impaired or overvalued businesses.
“(For the S&P 500® Index) the average annualized return for deleted companies was 11.4%, while those added to the Index earned just 0.4%.”
Turning to the timing of when companies are added to or removed from the Index, the case is clearer. Companies tend to be added to the S&P 500® Index after they have appreciated a great deal and when they are generally well regarded. Conversely, companies tend to be deleted from the Index after they have already declined in value. A 2005 report by William Hester of the Hussman Funds attempted to quantify the result of this buy high/sell low effect. Looking back at the period from 1998–2005, he noted “the average annualized return for deleted companies was 11.4%, while those added to the Index earned just 0.4%.”8 A similar article in the Journal of Banking & Finance looked at Index additions and deletions from 1962–2003 and concluded, “The average cumulative raw returns of added stocks are 40% over the three year period and 75% over the five year period... (while) rather surprisingly the average cumulative returns of deleted stocks are...68% and 107% over three and five year periods respectively.”9 Because an essential component of our investment discipline is our focus on value versus price, we prefer to buy after price declines and sell after price increases. We think our tendency to be more independent and contrary should add greater value than the approach used by the committee at McGraw Hill.
Finally, in terms of portfolio construction, because the S&P 500® Index is a capitalization-weighted index, the Index automatically owns more of the stocks that have already gone up in price. This defies the basic economic principle that higher prices reduce returns. This principle is obvious if you imagine a stock trading at $20 per share with durable earnings of $2 per share. If the stock’s price increases to $40 per share without any increase in the company’s earnings outlook, why would any rational investor want to invest twice as much at the higher price than at the lower price? As with the timing of additions and deletions, this method of portfolio construction leads to a momentum bias in which the Index adds or increases the weighting of companies after they have risen in price and reduces their weighting or eliminates them after share prices have declined.
Whether by more thoughtful stock selection, the careful timing of purchases and sales or flexible portfolio construction, we are convinced that disciplined, patient and diligent portfolio managers like us can and will add value over the long term. However, the momentum nature of the Index creates a self-reinforcing feedback loop that can persist for a long time. The better the S&P 500® Index does, the more money is withdrawn from active managers and invested in the Index. These fund flows further propel the Index higher and the cycle repeats. Since 2007, roughly $600 billion has been withdrawn from actively managed domestic equity mutual funds and poured into ETFs and index funds. Given these fund flows, it is not surprising that the S&P 500® Index has been difficult to beat.
“Davis New York Venture Fund, for example, outperformed the Index by 19% in 2000 and for the next one, three, five, and 10 year stretches.”
Such feedback loops tend to end in bubbles, and bubbles eventually burst. We saw such a bubble in the late 1990s when the S&P 500® Index galloped ahead and disciplined, value investors like us were considered dinosaurs. But when the bubble burst in 2000, many of these dinosaurs posted the best relative results of their careers. Davis New York Venture Fund, for example, outperformed the Index by 19% in 2000 and for the next one, three, five, and 10 year stretches.10 While we do not know when the current cycle will end, we remain confident that the investment discipline that has served us well for more than 45 years will continue to do so.
Turning to expenses, we must start with the fact that all funds (including index funds and ETFs) carry expenses. Although this is obvious, investors are sometimes surprised to learn that 100% of S&P 500® Index funds and ETFs underperform the Index 100% of the time, albeit by a relatively small amount. By way of comparison, Davis New York Venture Fund has outperformed in 64% of all rolling three year periods, 71% of all rolling five year periods and 94% of all rolling 10 year periods since 1969.10 Our performance is helped by the fact that the expense ratio on our Class A shares is only 0.88% per year, giving the average index fund an expense advantage of only 0.6%–0.7%. Offsetting this relatively small advantage is one final and important disadvantage. As far as we know, the committee managing the S&P 500® Index has no incentive system or accountability tied to its long- term performance. While low expenses may seem like good governance, a lack of accountability does not. Even in the absence of the factors described above, we would never feel comfortable outsourcing stock selection and portfolio management to a group with no accountability or alignment in exchange for a savings of 0.7%.
6http://money.usnews.com/money/personal-finance/ mutual-funds/articles/2012/10/12/study-active-funds-consistently-fail-to-beat-benchmarks. 7Class A shares without a sales charge. Past performance is not a guarantee of future results. There is no guarantee the Fund will continue to outperform the market over the long term. See endnotes for a description of Outperforming the Market. 8www.hussmanfunds.com/rsi/misfitstocks.htm. 9Kalok Chan, Hung Wan Kot, Gordon Y.N. Tang, “A comprehensive long-term analysis of S&P 500 Index additions and deletions,” Journal of Banking & Finance, September 14, 2013. 10Class A shares without a sales charge. Past performance is not a guarantee of future results. Portfolio and Prospects “The durability, valuation and growth outlook of our companies argue for a very satisfactory future.”
Above and beyond this important but theoretical discussion, the key driver of our confidence lies in the durability, growth prospects and valuation of the companies we hold in Davis New York Venture Fund. To understand why, imagine the Fund being much, much larger and instead of owning a small percentage of each of these portfolio companies, we own the companies in their entirety.11 (For simplicity’s sake, we will assume their relative size corresponds with their weighting in the Fund.) Thus, imagine that together we own 100% of Bank of New York Mellon, Wells Fargo (WFC, Financial), Google (GOOG, Financial), American Express (AMEX, Financial), Berkshire Hathaway (BRK.A, Financial), UnitedHealth Group (UNH), Costco, Amazon, and so on.12
With this happy vision in mind, the first thought that stands out is the tremendous quality, resilience and durability of these businesses. Although each may be challenged in its own way, we find it difficult to imagine the combined value of these companies diminishing over the next decade despite all the unsettling developments worldwide that worry and distract investors. In aggregate, these companies have strong competitive positions, durable business models, conservative capital structures, and able and honest management teams.
“In aggregate, our companies have strong competitive positions, durable business models, conservative capital structures, and able and honest management teams.”
Taking this exercise a step farther, if we owned these businesses in their entirety, we would determine our performance each year by considering the earnings each company generated relative to the price we paid to acquire it. If the companies had been purchased for $1 trillion and were currently generating earnings of $70 billion, we would say we earned a 7% return. If the companies continue to grow and reinvest profitably, these earnings (and thus our return) will increase over time. For example, a growth rate of 7% per year will increase our earnings yield to more than 10% in just five years. By considering stock ownership in this way, investors can ignore daily, monthly and even annual price fluctuations and instead focus on the earnings and growth prospects of the businesses. These are the true drivers of long-term performance.
This exercise captures our thinking in managing Davis New York Venture Fund and explains our confidence in its future prospects. Although in reality we only own a small percentage of each underlying company, the same math applies, driven by earnings as a percentage of prices paid and the growth of those earnings. Starting with earnings, we estimate the owner earnings generated by the companies that make up Davis New York Venture Fund currently represent a yield approaching 7% relative to today’s prices and a higher percent relative to the prices we paid to acquire each business. This valuation is solidly in the middle of historical ranges, making us comfortable that despite significant price appreciation in recent years, the Portfolio still represents a reasonable value at today’s prices.
What about the growth prospects of these companies? After all, as shown above, if we owned 100% of these companies, we would measure our future returns based on how much each company earns relative to the price we originally paid. Thus, the more these companies can grow their earnings, the higher our returns would be. This same principle that applies to owning 100% applies to our owning just a fraction of each business, although changes in perception can create huge short-term stock price gyrations. As Benjamin Graham famously said, “In the short term the market is a voting machine. In the long run it is a weighing machine.” As a crucial driver of future returns, profitable earnings growth must be a critical consideration when evaluating the future prospects of our Portfolio.
“The growth outlook for the average company is challenging. Fortunately, we do not have to own the average company.”
Before looking at the specifics of the companies we hold, a few general comments about earnings growth are in order. First, the U.S. economy and economies around the globe are clearly still facing a difficult period. Deleveraging and political uncertainty continue to hinder consumer and capital spending while competition, globalization, technology, and pricing transparency (driven by Internet access) are beginning to put real pressure on many businesses. This is particularly problematic at a time when corporate profit margins are at historically high levels. In a nutshell, the growth outlook for the average company is challenging.
Fortunately, we do not have to own the average company. Instead, we own a carefully selected portfolio of individual companies. Moreover, based on our research, we believe these companies can grow their businesses despite these challenging and competitive times. While each business is different, several themes in the Portfolio support our thesis.
For example, three of our holdings, Bank of New York Mellon (BK, Financial), Charles Schwab (SCHW, Financial) and JPMorgan (JPM, Financial), are earning well below their potential due to today’s historically low interest rates. While each of these outstanding companies is already a profitable industry leader, each should earn significantly more in a higher interest rate environment. Although there are no certainties in investing, history as well as current monetary and fiscal policies point to the likelihood of higher rates in the future, which in turn will add fuel to the earnings growth of these strong companies.
“Leaders like Costco, Amazon, CarMax, Texas Instruments, Paccar, and Ecolab have significant scale advantages that should drive earnings growth for years, if not decades.”
Another driver of earnings growth at some of our holdings comes from the integration of large announced mergers. While most mergers destroy value for the acquiring company, those rare ones that create an unquestioned industry leader are the exception. In such cases, the acquiring company does not benefit just from lower costs, but also potentially from more rational industry pricing. We currently own three companies (Sysco, Lafarge and Liberty Global) that have announced or completed mergers that give them leading market positions. Although the risk of regulatory intervention always exists, we expect these mergers to be approved and, as a result, we anticipate highly satisfactory earnings growth in the years ahead.
A third potential driver of earnings growth in these challenging times comes when companies complete a period of significant capital spending that brings new earning assets online. Although in very different businesses, three of our holdings—Canadian Natural Resources (CNQ, Financial), OCI N.V. and Las Vegas Sands (LVS, Financial)—share in common that each is completing a large addition to its existing capacity. The first is adding oil sands processing capacity in Alberta, the second a fertilizer plant in Iowa and the third a casino in Macau. As these large capital-intensive projects go from costing money to generating revenue, earnings should grow nicely.
In the three themes mentioned above, temporary headwinds to profitability should become tailwinds in the years ahead driving future earnings growth and therefore enhancing the value of our Portfolio. In addition to themes like these that relate to the completion of specific projects, other variables affecting future growth are less time sensitive and more fundamental. For example, leaders like Costco, Amazon, CarMax, Texas Instruments, Paccar, and Ecolab have significant cost and scale advantages that should drive earnings growth for years, if not decades, to come. Similarly, insurance and holding companies like Berkshire Hathaway, Loews and Markel with their long records of intelligent and opportunistic capital allocation should be able to grow value in all types of environments.
As owners of all of these companies, how can we not be excited by their prospects? Although no one can know what stock prices will do in the short term and although we always caution that unexpected shocks and dislocations inevitably occur from time to time, the durability, valuation and growth outlook for the companies that make up Davis New York Venture Fund argue for a very satisfactory future. We much prefer to own this outstanding collection of companies each of which we have evaluated and purchased individually rather than any basket of companies selected by committee or a computer.
11This hypothetical example is for illustrative purposes only. Actual results will vary. 12 Individual securities are discussed in this piece. While we believe we have a reasonable basis for our appraisals and we have confidence in our opinions, actual results may differ materially from those we anticipate. The return of a security to the Fund will vary based on weighting and timing of purchase. This is not a recommendation to buy, sell or hold any specific security. Past performance is not a guarantee of future results. A Word About Taxes “Realized gains are distributed twice per year.”
The companies we hold in Davis New York Venture Fund currently have an embedded capital gain of 43%. This number compares favorably to the 45% embedded gain in the Vanguard 500 Index Fund.13 As large shareholders ourselves, we are conscious of tax costs and make every effort to be tax efficient.
In considering these gains, the first thought worth mentioning is that gains result from appreciation in our portfolio companies. While no one enjoys paying taxes, an absence of gains might be considered a more serious problem. When we sell a company with a gain, we generally do so because we think it will return less than the rest of the Portfolio. If we are correct in our analysis, then holding the stock in order to avoid the tax is unlikely to be the right choice.
We distribute realized gains twice a year and will do our best to keep shareholders informed. Virtually all our gains are long term and generally subject to lower tax rates than short-term gains or dividend income. Thus, for longtime shareholders in search of yield, capital gains distributions tend to be more tax efficient than interest or dividend income.
The following annualized total return figures are as of June 30, 2014 for Davis New York Venture Fund Class A shares including a maximum 4.75% sales charge: Return before taxes: 1 Year, 16.49%; 5 Years, 14.99%; 10 Years, 6.32%. Return after taxes on distributions: 1 Year, 13.22%; 5 Years, 14.07%; 10 Years, 5.82%. Return after taxes on distributions and sale of fund shares: 1 Year, 11.39%; 5 Years, 12.01%; 10 Years, 5.06%. The performance presented represents past performance and is not a guarantee of future results. Total return assumes reinvestment of dividends and capital gain distributions. Investment return and principal value will vary so that, when redeemed, an investor’s shares may be worth more or less than their original cost. See endnotes for additional disclosure. 13This is not a solicitation for the Vanguard 500 Index Fund. Davis New York Venture Fund is not affiliated with the Vanguard 500 Index Fund. Conclusion “Confident we will deliver satisfactory absolute long-term returns.”
As always, our goal in this report is to provide shareholders with a deeper understanding of our investment process in general and Davis New York Venture Fund in particular. At a time when benchmarks seem to matter more than outcomes and passive investing and ETFs are the rage, we are more committed than ever to active, research-driven portfolio management. In our view, experience, judgment and alignment are advantages that when combined with a proven, consistent and long-term investment discipline should lead to satisfactory absolute returns. At the same time, flaws in the way the S&P 500® Index is structured and managed as well as the lack of accountability of the faceless committee that oversees the Index are disadvantages that should allow us to achieve satisfactory relative results in the years ahead.
While we have ground to make up from more recent periods, we are committed to our investment discipline and confident in our team. This confidence is fortified not just by our long-term results but by the durability, growth and valuation of the individual companies that make up Davis New York Venture Fund.
Before ending, I would like to thank my partner and co-manager Danton Goei as well as our colleagues whom we are fortunate to work with every day. We are all grateful for the trust you have placed in our firm and look forward to reporting improved results in the years ahead.
Thank you.
This report is authorized for use by existing shareholders. A current Davis New York Venture Fund prospectus must accompany or precede this material if it is distributed to prospective shareholders. You should carefully consider the Fund’s investment objective, risks, charges, and expenses before investing. Read the prospectus carefully before you invest or send money. This report includes candid statements and observations regarding investment strategies, individual securities, and economic and market conditions; however, there is no guarantee that these statements, opinions or forecasts will prove to be correct. These comments may also include the expression of opinions that are speculative in nature and should not be relied on as statements of fact.
Objective and Risks. Davis New York Venture Fund’s investment objective is long-term growth of capital. There can be no assurance that the Fund will achieve its objective. The Fund invests primarily in equity securities issued by large companies with market capitalizations of at least $10 billion. Some important risks of an investment in the Fund are: stock market risk: stock markets have periods of rising prices and periods of falling prices, including sharp declines; manager risk: poor security selection may cause the Fund to underperform relevant benchmarks; common stock risk: an adverse event may have a negative impact on a company and could result in a decline in the price of its common stock; large-capitalization companies risk: companies with $10 billion or more in market capitalization generally experience slower rates of growth in earnings per share than do mid- and small- capitalization companies; mid- and small- capitalization companies risk: companies with less than $10 billion in market capitalization typically have more limited product lines, markets and financial resources than larger companies, and may trade less frequently and in more limited volume; headline risk: the Fund may invest in a company when the company becomes the center of controversy. The company’s stock may never recover or may become worthless; financial services risk: investing a significant portion of assets in the financial services sector may cause the Fund to be more sensitive to problems affecting financial companies; foreign country risk: foreign companies may be subject to greater risk as foreign economies may not be as strong or diversified. As of June 30, 2014, the Fund had approximately 14.9% of assets invested in foreign companies; emerging market risk: securities of issuers in emerging and developing markets may present risks not found in more mature markets; foreign currency risk: the change in value of a foreign currency against the U.S. dollar will result in a change in the U.S. dollar value of securities denominated in that foreign currency; depositary receipts risk: depositary receipts may trade at a discount (or premium) to the underlying security and may be less liquid than the underlying securities listed on an exchange; and fees and expenses risk: the Fund may not earn enough through income and capital appreciation to offset the operating expenses of the Fund. See the prospectus for a complete description of the principal risks.
Davis Advisors is committed to communicating with our investment partners as candidly as possible because we believe our investors benefit from understanding our investment philosophy and approach. Our views and opinions include “forward-looking statements” which may or may not be accurate over the long term. Forward-looking statements can be identified by words like “believe,” “expect,” “anticipate,” or similar expressions. You should not place undue reliance on forward-looking statements, which are current as of the date of this report. We disclaim any obligation to update or alter any forward-looking statements, whether as a result of new information, future events, or otherwise. While we believe we have a reasonable basis for our appraisals and we have confidence in our opinions, actual results may differ materially from those we anticipate.
The information provided in this material should not be considered a recommendation to buy, sell or hold any particular security. As of June 30, 2014, the top ten holdings of Davis New York Venture Fund were: Bank of New York Mellon Corp., 7.56%; Wells Fargo & Co., 7.07%; American Express Co., 6.58%; Google Inc., 6.25%; Berkshire Hathaway–Class A, 4.96%; UnitedHealth Group Inc., 2.83%; Costco Wholesale Corp., 2.68%; Liberty Global PLC– Series C, 2.31%; Express Scripts Holding Co., 2.28%; Canadian Natural Resources, Ltd., 2.17%..
Davis Funds has adopted a Portfolio Holdings Disclosure policy that governs the release of non-public portfolio holding information. This policy is described in the prospectus. Holding percentages are subject to change. Click here or call 800-279-0279 for the most current public portfolio holdings information.
After-tax returns show the Fund’s annualized after-tax total return for the time period specified. After-tax returns with shares sold show the Fund’s annualized after-tax total return for the time period specified plus the tax effect of selling your shares at the end of the period. To determine these figures, distributions are treated as taxed at the maximum tax rate in effect at the time they were paid with the balance reinvested. The 2014 tax rates are 39.6% for ordinary income, 20% for qualified income, and 20% for long-term capital gains. An additional 3.8% tax imposed by the Affordable Care Act is included on all investment income as part of the highest marginal rate used in all after-tax performance calculations. The tax rate is applied to distributions prior to reinvestment and the after-tax portion is reinvested in the Fund. State and local taxes are ignored.
Broker-dealers and other financial intermediaries may charge Davis Advisors substantial fees for selling its funds and providing continuing support to clients and shareholders. For example, brokerdealers and other financial intermediaries may charge: sales commissions; distribution and service fees; and record-keeping fees. In addition, payments or reimbursements may be requested for: marketing support concerning Davis Advisors’ products; placement on a list of offered products; access to sales meetings, sales representatives and management representatives; and participation in conferences or seminars, sales or training programs for invited registered representatives and other employees, client and investor events, and other dealer-sponsored events. Financial advisors should not consider Davis Advisors’ payment(s) to a financial intermediary as a basis for recommending Davis Advisors.
Over the last five years, the high and low turnover rate for Davis New York Venture Fund was 20% and 7%, respectively.
Outperforming the Market. Davis New York Venture Fund’s average annual total returns for Class A shares were compared against the returns of the S&P 500® Index as of the end of each quarter for all time periods shown from February 17, 1969, through June 30, 2014. The Fund’s returns assume an investment in Class A shares on the first day of each period with all dividends and capital gain distributions reinvested for the time period. The returns are not adjusted for any sales charge that may be imposed. If a sales charge were imposed, the reported figures would be lower. The figures shown reflect past results; past performance is not a guarantee of future results. There can be no guarantee that the Fund will continue to deliver consistent investment performance. The performance presented includes periods of bear markets when performance was negative. Equity markets are volatile and an investor may lose money. Returns for other share classes will vary.
We gather our index data from a combination of reputable sources, including, but not limited to, Thomson Financial, Lipper and index websites.
The S&P 500® Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The Index is adjusted for dividends, weighted towards stocks with large market capitalizations and represents approximately two-thirds of the total market value of all domestic common stocks. Investments cannot be made directly in an index.
After October 31, 2014, this material must be accompanied by a supplement containing performance data for the most recent quarter end.
Shares of the Davis Funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including possible loss of the principal amount invested.
#4425 6/14 Davis Distributors, LLC, 2949 East Elvira Road, Suite 101, Tucson, AZ 85756, 800-279-0279, davisfunds.com
