Cody’s high aim

Cody’s high aim – AIM Capital Management Vice President Claude C. Cody

Kimberly Seals McDonald

Over the last five years, AIM Balanced Fund A has posted a solid 13.23% annualized total return. According to Claude C. Cody, vice president of AIM Capital Management, an investment strategy based on consistency and discipline is the key to the fund’s success.

AIM’s performance earned it the No. 3 slot on BE’s annual listing of the best balanced mutual funds (see “Down But Not Out,” April 1995).

Cody co-manages AIM Balanced Fund A with Robert Alley. The 43-year-old Cody handles the equity side of the $50.7 million fund, and Alley the fixed-income or bond portion. Cody says his mission over the past 13 years as an AIM portfolio manager has been to give investors consistent returns, using a disciplined strategy that focuses on long-term growth.

He must be doing something right. According to Cody, AIM Balanced Fund A delivered a 21.25% total return through July 10. He says the value surged over the past two months because of the rise in the portfolio’s technology stocks.

The average investor may think that a “balanced fund” has half its assets in stocks and half in bonds, but Cody says the poor performance of the bond market this year has forced a different type of asset allocation. Currently, 65% of the AIM Balanced portfolio is allocated to stocks. Within that equity group, 25% of the assets are in technology stocks. Everyone knows the stock market is a volatile environment, and technology stocks are among the riskiest. For that reason, Morningstar has assigned an above-average risk rating to Cody’s fund.

Cody says choosing securities for the balanced fund boils down to a simple question: “What do I think about this company versus what do I know about it.”

Cody insists he never devises a strategy based on what he “thinks” will happen to the economy or within a certain sector. Instead, the self-proclaimed numbers man says he goes with what he “knows,” based primarily on corporate earnings reports. For Cody, new companies (smaller capitalized) being added to the fund must have maintained a 15% growth rate for at least three years. That’s where the consistency comes in. Cody says he is not impressed by one-time events that may boost earnings for one quarter but have little or no impact the next. A company must display a continuing stream of strong earnings to make it into Cody’s portfolio. “I don’t mind being such a stickler for discipline,” Cody says.

Referring to his heavy investment in the technology sector, Cody points out that earnings reports from technology companies, especially semiconductor capital equipment firms, have been stellar. Capital equipment companies manufacture the machinery that make semiconductors. With demand for computers consistently strong among corporate and individual users, semiconductor makers should be kept busy–and profitable, Cody says.

Cody also has injected an international flavor into his portfolio: 7% of the portfolio is in foreign stocks and bonds. These include Nokia (NYSE symbol: NOK.A), Tele Denmark (NYSE symbol: TLD) and Ericsson (NASDAQ symbol: ERICY). All of these companies are in the telecommunications sector.

Completing the spectrum of the balanced fund are soem well-known and largely capitalized companies like International Business Machines (NYSE symbol: IBM). These companies have found their way into the AIM Balanced portfolio because, Cody says, the numbers show that they’re making a comeback. Since a significant portion of their revenues come from overseas, many of these companies will have an even stronger comeback when foreign economies improve. Recent figures from the Organization of Economic Cooperation and Development, a global research cooperative in Paris, indicate that between 40% and 45% of the revenues of S&P 500 companies come from overseas operations.

AIM Balanced Fund A requires a minimum initial investment of $500 and is available in front-loaded A shares (you will pay 4.75% sales charge when you open your account), or B shares, which have a 5% deferred sales charge that you pay when you cash out.

To order a prospectus, call 800-347-4246.

COPYRIGHT 1995 Earl G. Graves Publishing Co., Inc.

COPYRIGHT 2004 Gale Group