(PUB) Investing 2015

13

October 2015

Morningstar FundInvestor

T. Rowe Price Capital Appreciation in a Groove Leaders & Laggards | Robert Goldsborough

which continually has outperformed its category and the MSCI All World Stock Index.

Laggards Berwyn BERWX

With a 13 . 2% loss in 2015 , this fund is lagging 92% of its competitors in the domestic small-blend Morn- ingstar Category. While the fund has posted strong performance over longer periods, its struggles this year can be attributed to poor stock selection, as the fund has had a meaningful stake in the struggling materials sector and has been hurt by investments in toymaker Leapfrog LF , services and solutions firm Unisys UIS , which has shed 59% this year, and offshore oil rig fabricator Gulf Island Fabrication GIFI . Oakmark Global OAKGX This Gold-rated fund has trailed 89% of its world-stock peers in 2015 , losing 9 . 7% for the year. The fund has substantial overweightings in the financials and technology sectors, and certain bets in those indus- tries, including Oracle ORCL , Intel INTC , and Franklin Resources BEN , have struggled this year. Other weak performers have included Union Pacific UNP , Applied Materials AMAT , Tenet Healthcare THC , and General Motors GM . Managers Clyde McGregor and Rob Taylor have strong contrarian instincts and pay little attention to their benchmark or the category norm, which can mean occasional periods of calendar-year underachievement. However, the fund’s long-term track record makes it one of its category’s best options. Fidelity Investment Grade Bond FBNDX This Silver-rated fund has been hurt by a bullish out- look on credit and an overweighting in corporate bonds. The fund has lost 0 . 3% thus far in 2015 , lagging 81% of intermediate-term bond rivals this year. As investment-grade corporate spreads have widened, lead portfolio manager Jeffrey Moore has seen his best opportunities right now in corporates, and partic- ularly in financials, which benefit from improving balance sheets. Moore has proved himself to be adept at identifying pockets of relative value within a rela- tively constrained universe. The fund also has a solid process and one of the lowest fees in its category. K Contact Robert at robert.goldsborough@morningstar.com

Leaders T. Rowe Price Capital Appreciation PRWCX This fund has a Morningstar Analyst Rating of Gold and has posted fabulous performance thus far in 2015 , besting 99% of its moderate-allocation peers. Lead manager David Giroux made a good call keeping dura- tion low. He also boosted equity weights of consumer staples and utilities, while paring energy and financial services. Two stock picks that have been winners are AutoZone AZO , which has beaten analysts’ estimates for six straight quarters, and financial-services tech- nology leader Fiserv FISV . Fairholme FAIRX This Silver-rated fund has topped 96% of its large- value peers since the start of 2015 —a marked turnaround relative to a bad 2014 . Thus far in 2015 , large insurer American International Group AIG , which is the fund’s biggest investment at a whopping 29% of assets, has meaningfully outperformed the broader market amid strong investment performance and the favorable conclusion of a lawsuit filed by pre-financial crisis shareholders. AIG ’s strength has more than offset weakness at asset play Sears Holdings SHLD , which is down 31 . 5% this year, and Bank of America BAC . Oppenheimer Global OPPAX This Silver-rated fund has outperformed 87% of com- petitors in its world-stock category in 2015 through strong stock selection from names in the United States and abroad. Smartphone component producer Murata Manufacturing has been a winner. So have other tech and health-care names including programmable logic device maker Altera ALTR , which is the target of an ac- quisition by Intel INTC , and health-benefits giant Aetna AET , which recently announced a bid to acquire Humana HUM . Although manager Rajeev Bhaman and his team court slightly more volatility than the fund’s average peer, that volatility hasn’t harmed the fund,

Ten Best-Performing Funds

Fund Name YTD Cat Rank % ASTON/Montag & Caldwell B 1 Diamond Hill Small-Mid Ca 1 DoubleLine Total Return B 1 Fairholme Focused Income 1 Fidelity Overseas 1 Scotia Dynamic U.S. Growt 1 T. Rowe Price Capital App 1 T. Rowe Price Global Tech 1 T. Rowe Price Media & Tel 1 Vanguard Interm-Term Invm 1

Ten Worst-Performing Funds

Fund Name

YTD Cat Rank %

Delafield Fund

100 100

Longleaf Partners Janus Contrarian T

99 99 98

Loomis Sayles Investment Artisan International Inv

GoodHaven 98 Manning & Napier Equity 98 Royce Micro-Cap Invmt 98 Royce Special Equity Mult 98 Franklin Income 97