(PUB) Investing 2015

July 2015

Morningstar FundInvestor

13

CGM Focus and Thornburg Value Are Rocking Leaders & Laggards | Russel Kinnel

Laggards Janus Contrarian JSVAX

How the heck did a large-blend fund that has an over- weighting in health care end up with a 7% year-to- date loss? Dig into the portfolio and you’ll see some really beaten-down value stocks. When investors decide a battered stock is a value trap instead of a value, it can get ugly. Of course, all these holdings could rally, but for now it’s not pretty. Number-two holding United Continental Holdings UAL is down 20% . Then there’s Motorola Solutions MSI down 14% , Knowles Corp KN down 24% , and Lands’ End LE down 55% . AMG Yacktman Focused YAFFX Among large caps, even some names considered blue chips have been singed. This fund is down 5% and in the bottom 2% of its peer group. Only two of this fund’s top 10 are in the black. Among the hard-hit are Procter & Gamble PG at negative 13% , Oracle ORCL down 10% , and Twenty-First Century Fox FOXA down 15% . These are the sorts of names that have propelled the fund to strong long-term returns, even if they’ve caused it to lag more recently. FPA Perennial FPPFX This fund is getting a new name, manager, and strategy. On Sept. 1 , Greg Nathan takes over what will be FPA US Value. In the meantime, transpor- tation stocks like Knight Transportation KNX and Heartland Express HTLD have hurt year-to-date performance. The fund is flat and in the bottom 2% of its peer group. AMG Yacktman YACKX The story is the same as that of Yacktman Focused, only with smaller position sizes. The fund is down 5% and in the bottom 2% of its peer group. Longleaf Partners LLPFX Energy stocks are hurting this fund again; it is down 4% and in the bottom 3% of its peer group. Murphy Oil MUR is down 15% , and old irritant Chesapeake Energy CHK is down 42% . A 16% weighting in energy and a 0% weighting in health care is a recipe for last place in the first half of 2015 . K

Leaders CGM Focus CGMFX

Ten Best-Performing Funds

Ten Worst-Performing Funds FPA Perennial 100 Vanguard Long-Term Invest 100 AMG Yacktman Focused Serv 99 Janus Contrarian T 99 Loomis Sayles Investment 99 AMG Yacktman Service 98 FAM Value Inv 98 FPA Capital 98 Loomis Sayles Bond Retail 98 RiverPark/Wedgewood Retai 98 YTD Cat Rank % Dreyfus Opportunistic Sma 1 Fairholme Focused Income 1 Scotia Dynamic U.S. Growt 1 T. Rowe Price Capital App 1 Thornburg Value A 1 CGM Focus 2 Eventide Gilead N 2 Fidelity Overseas 2 Fidelity Small Cap Stock 2 Sequoia 2 Fund Name Fund Name YTD Cat Rank %

Ken Heebner’s fund needed a rally, and it’s up 5 . 4% to land in the top 2% of its peer group for the year to date. It was in a brutal slump in part because of a 23% short against Treasuries. However, that’s helped this year, as have long positions in Fiat Chrysler Automobiles FCAU and Lennar LEN . This fund’s turnover is 266% , though, so it won’t be certain what the drivers were until the second-quarter port- folio comes out. Thornburg Value TVAFX This fund suffered an awful stretch from 2010 through 2012 but has since rebounded nicely. Giving an overweighting to health care has worked well, but so have some well-placed consumer bets such as Starbucks SBUX and Amazon.com AMZN . Sequoia SEQUX This closed fund has 26% of assets in Valeant Phar- maceuticals International VRX . Valeant is up 67% for the year to date. As a result, it’s up 10% and in the top 2% of its category. That’s pretty much the whole story. The fund actually has quite a few names that are in the red, including Berkshire Hathaway BRK .A, Fastenal FAST , and Precision Castparts PCP . Dreyfus Opportunistic Small Cap DSCVX David Daglio’s bold fund is usually at the top or bottom of fund rankings. This year it is up 10% and in the top 1% of its peer group. He concentrates the portfolio on four sectors: technology, industrials, consumer cycli- cals, and financials. His strategy is an unusual blend of value and growth names, and this year he’s hitting on a lot of winners from both sides such as SVB Financial SIVB and Infoblox BLOX .