(PUB) Investing 2015

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In the Market’s Sweet Spot ... Maybe Tracking Morningstar Analyst Ratings | Russel Kinnel

First Eagle Fund of America FEAFX Top 27% trailing five years

This Silver-rated fund has handled a generational shift pretty smoothly. David Cohen has dialed down his contributions here, while Eric Stone has ramped up since being named manager in 2013 . Harold Levy remains at the fund, as he has since its 1987 incep- tion. The fund seeks corporate changes that will drive stock prices higher and has found winners in the likes of Seagate Technology STX , Wyndham Worldwide WYN , and Sealed Air SEE . The fund’s A shares ( FEFAX ) are open. The Y shares are not. This closed Silver-rated fund has posted a middling five-year return. Favoring tech and basic materials over health care explains the sluggish results. Thyra Zerhusen and team look for niche businesses with growing market share and little debt. Biotech stocks rarely meet their criteria, which explains the small stake in health-care stocks. But the strategy has been a winning formula over the long haul; the fund’s in the top 2% of mid-blend funds for the trailing 10 years. This fund had been doing better than average, but the slump in energy really hurt—the fund has 18% of assets in energy versus 6% for the category. The fund plies a very aggressive kind of value investing thanks to Peter Higgins, who runs his half of the portfolio independently from David Palmer of Welling- ton Management and is a deep-value investor. Palmer is a less-daring classic-value investor, but that still doesn’t make this a tame fund. Aston/Fairpointe Mid Cap CHTTX Top 51% , trailing five years Vanguard Capital Value VCVLX Top 66% trailing five years This closed, Gold-rated fund has a weak five-year number and a great 10 -year mark. It has a focused portfolio that makes for a bumpy ride. Cyclical stocks like Compass Minerals International CMP and Armstrong World Industries AWI have held it back. Pat English and team look for solid management at companies with low valuations. That has worked nicely over the long haul but has not clicked of late. K FMI Common Stock FMIMX Top 68% trailing five years

Some say mid-caps are the sweet spot of the stock market. (Especially if they happen to be marketing mid-cap funds.) They say that you have more profes- sional management and less volatility than small caps yet greater room to grow than large caps.There’s some truth in that, and mid-caps currently have slightly better 10 -year returns than large and small. It’s something of a sweet spot for mutual funds, too, as you’ll find some outstanding managers there. Let’s take a look at how a few of our top-rated actively managed mid-blend funds have fared of late. Some are closed to new investors. Don’t forget about great passive options like Vanguard Mid Cap VIMAX and Vanguard Extended Market Index VEXAX . How does a fund named “small cap” end up in the mid-cap Morningstar Category? This fund buys small- cap stocks but allows them to grow into mid-caps (provided they pick the right stocks, of course). This closed fund has a Morningstar Analyst Rating of Gold and has been the jewel in Longleaf’s crown, as it has had an array of quirky winners from Level 3 Commu- nications LVLT to Vail Resorts MTN . Longleaf Partners Small-Cap LLSCX Top 20% trailing five years This Bronze-rated fund was clobbered in 2008 but came back strong in the ensuing years. It is on pace to record its sixth top-quartile calendar-year perform- ance in the past seven. It hasn’t changed much since 2008 , except to drill deeper on a company’s debt burden, but the market decided it liked some of its dull but steady names after all. Jones Lang LaSalle JLL , Newell Rubbermaid NWL , Mohawk Indus- tries MHK , and CBRE Group CBG have been in the fund since before 2008 and have each produced more than 20% annualized returns over the past five years. Ariel Fund ARGFX Top 20% trailing five years

What Are Morningstar Analyst Ratings?

Our ratings are chosen for long- term success. Analysts assess a fund’s competitive advantages by analyzing people, process, parent, performance, and price. They do rigorous analysis and then submit their ratings to a committee that vets their work for thoroughness and consistency.