(PUB) Investing 2015

December 2015 Vol. 24 No. 4

FundInvestor Research and recommendatio s for the s riou fund investo

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Every Picture Tells an Investment Story

manager who sells at the first hint of bad news is very different from one who rides it out.

RusselKinnel, Director of ManagerResearch and Editor

Typically a manager will have a few reasons for selling, but the main reasons are success or failure. If it’s success, the manager is likely selling because the market has come around to his way of thinking and has placed a higher valuation on a company. These would be sales that tilt toward the upper-right side of the style box. For failures, you may have declining price multiples and declining market cap. These are usually the sales to the lower left of the rest of the style box.

Fund Reports

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Every active manager is different. The labels we put on them might make them look the same, but they aren’t. To make the most of them, you need to under- stand a fund’s strategy. So, I thought I’d bring some pictures to help you understand how a manager invests. We mapped every buy and sell that eight prominent stock funds made in their most recent reporting periods. Seeing every holding mapped is helpful, but just as useful is seeing what a stock looks like when it is appealing enough to be purchased and when it is unappealing enough to be sold. As you can see from the graphs, all of these managers have distinctly different styles. The Morningstar Style Box is built using value and growth measures for the x-axis score and market cap for the y-axis score. High valuations and high growth rates push a stock to the far-right side; a utilities stock with low valuations and low growth would be far to the left. It’s not a perfect system, and it might not capture precisely what a manager does, but it does give you some sense of what’s driving a manager’s strategy. I often find that sell decisions are the best way to separate managers. A value manager who lets her winners ride is very different from one who sells as soon as the stock’s price multiples match those of the S & P. Or you can reverse and say a growth

Champlain Mid Cap Fairholme Focused Income T. Rowe Price Dividend Growth

Morningstar Research

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How to Beat an Efficient Market

The Contrarian 10 Is It Safe to Invest All Your Money With One Fund Company?

Let’s take a look at some trades from well-known funds.

Red Flags

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Rising Concentration Points to New Risks

Oakmark Select OAKLX: Paying a fair price for a great business.

Market Overview

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Oakmark Select OAKLX

Valuation Value

Leaders & Laggards

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Blend

Growth

1 Buys 1 Sells

Manager Changes and News

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Portfolio Matters

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5 Year-End Portfolio Mistakes to Avoid

Tracking Morningstar

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Market Capitalization Small Mid Large

Analyst Ratings

Income Strategist

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Vanguard Rolls Out Muni Index Funds

Changes to the 500

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FundInvestor 500 Spotlight

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Let’s start with the fund that made the fewest trades. Bill Nygren is a low-turnover-focused portfolio

Follow Russ on Twitter @RussKinnel

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