Franklin Bissett Energy Fund

Analysis: Focusing on the energy sector, managers Gary Aitken and Les Stelmach use the Bissett approach of fundamentally driven, bottom up research that looks for companies with sustainable, repeatable growth that are trading at reasonable valuations.

Despite the narrow focus, the fund is fairly diversified holding more than 50 stocks with the top ten making up just over 30%. It can invest in companies of any size, but the focus is currently more on small and mid-cap names. At the end of the year, it was overweight in the oilfield service industry, which made up a third of the fund.

Portfolio turnover has been relatively modest, averaging 37% for the past five years. Recently, turnover has been on the increase as the managers took advantage of volatility in the sector allowed them to take profits in some longstanding positions, as well as make some new investments in attractive energy names. As long as volatility remains high, the managers expect that they will continue to trade more frequently to better position the portfolio.

Performance has been strong. For the five years ending February 28, it has been the top performing fund in the category, both on an absolute and risk adjusted basis. Overall volatility has been roughly in line with the category average. Compared to its peer group, it has posted stronger performance in rising markets, and held up much better when markets fall.

The MER is 2.52%, which is right in line with the category average.

Because this fund invests only in energy related companies, it is not a fund that should be considered by everybody. Only those with a very high risk tolerance looking for specific exposure to energy stocks should think about this fund. But for those looking for that type of a fund, this is my top pick. I expect that it will continue to deliver above average risk adjusted returns over the long term.