Over the short-to-medium-term it's almost impossible to predict what a share price, or indeed the whole market, will do.
You will often see high performance in one year and then perhaps a year of smaller returns whilst the market gets to grips with the new valuation.
It's very hard for a fund manager to be a high performer every single year. The returns speak for themselves over a three, five or ten year period, but a single year alone can show an underperformance.
Over the past year the Forager Australian Shares Fund (ASX: FOR) performance, net of fees, has been 6.5%. However, the ASX/S&P All Ordinaries Accumulation Index has returned 13.73%.
But, over the past three years Forager's portfolio has returned 16.32% per annum net of fees compared to the index's 9.48%. Over the past five years the Forager net return has been 15.78% per annum compared to 10.28% per annum for the index.
Forager is essentially a contrarian investor. Steve Johnson and his team look at deeply unloved stocks that they believe could be turnaround stories. Some of its investments in recent times have been mining services businesses, iSelect Ltd (ASX: ISU) and Thorn Group Ltd (ASX: TGA).
Forager's ideas are not your typical ideas for investing. These picks are 'deep value' which could drop further and can go wrong, just like any fund manager's picks. However, it is clearly possible to outperform with unloved stocks, as Forager has shown.
Foolish takeaway
Not only is a Forager a proven long-term picker, but relative underperformance by 'value stocks' in one year regularly turns into outperformance the next year. Although I don't own shares, I respect the Forager way of doing things and would gladly have it in my portfolio at the current price.
