Value investing experienced a brief revival in early 2025, particularly as the S&P 500 faced a significant downturn, plummeting 19% from its peak in February to a trough in early April. During this turbulent period, the Dodge & Cox Stock fund (DODGX), a key player in the Kiplinger 25—an esteemed list of no-load mutual funds—demonstrated relative resilience, with only a 15% decline. However, the subsequent rebound saw the fund recover 21% by September, still trailing the S&P 500’s impressive 34% increase during the same timeframe.
Over the last 12 months, through September 30, Dodge & Cox Stock posted a modest gain of just over 9%, significantly lagging behind the S&P 500’s nearly 18% growth. This situation serves as a timely reminder of the value of diversifying investment strategies, as such diversification can help smooth out returns amid market fluctuations. Currently, the composition of the S&P 500 is heavily influenced by growth and momentum stocks, positioning Dodge & Cox Stock as a counterbalance within a more traditional investment portfolio.
The fund’s investment strategy remains anchored in its core principle of identifying underappreciated stocks. Key holdings include Charles Schwab (SCHW), Johnson Controls International (JCI), and RTX (RTX)—an aerospace and defense company. Each of these stocks has seen an increase of over 40% in the past year, distinct from the dominant tech firms residing at the top of the S&P 500.
The fund is managed by a team of contrarian investors who actively seek opportunities in struggling sectors. Recently, they increased their investments in the healthcare sector, which has lagged in performance since early 2023, marking it as the worst-performing sector over the past year. In a notable move, the managers boosted their holdings in UnitedHealth Group (UNH), which recently reinstated a former CEO to guide the company. They believe UNH is currently undervalued compared to both the overall market and typical valuations within the healthcare sector.
Investors interested in the Dodge & Cox Stock fund are generally advised to cultivate patience, as the realization of the fund’s investment strategies may take time. Despite recent performance challenges, the fund has maintained an impressive 17% annualized return over the past five years, outpacing the S&P 500 during that period. This data offers perspective on long-term investment strategies amidst short-term market volatility.
