Sector weightings can help you spot true value mutual funds. A fund with substantial holdings of industrial companies and financial stocks is probably a pure value fund while a significant exposure to technology stocks suggests that a fund is not a pure value fund.
Dodge & Cox Stock Fund, for example, recently reported a 21.9 percent weighting in industrials and 19.5 percent in financials, vs. a 7.4 percent exposure to technology stocks. Therefore, this fund can be considered a pure value fund. Another highly-rated large-cap value fund, Legg Mason Value Trust, has a huge (38.8 percent) exposure to financial stocks but little (3.7 percent) in industrials and more (15.5 percent) in technology, so it’s less of a pure value play-and not as effective as a portfolio diversifier.
A fund’s performance in recent years also may be a clue to its identity. If you see a fund that did very well in 2000 and 2001 but not so well in 1998 and 1999, it’s probably a value fund because value stocks went from out-of-favor to being in demand.