(PUB) Investing 2016

13

May 2016

Morningstar FundInvestor

Artisan Value Rebounds Strongly Leaders & Laggards | Andrew Daniels

Laggards Silver-rated Fidelity Low-Priced Stock FLPSX has lagged 95% of its mid-cap value peers thus far in 2016 . Large overweightings in consumer discretionary and technology have hurt results relative to peers. Data storage firm Seagate Technology STX and consumer discretionary firms Next NXT , Barratt Developments BDEV , and Bellway BWY have all declined more than 14% this year. Bronze-rated Matthews China MCHFX has trailed 99% of its China-region peers for the year to date. Lead manager Andrew Mattock’s focus on firms with robust long-term earnings prospects that will benefit from Asia’s rising income levels has led to an overweighting in consumer discretionary and industrials. Unfortunately, those sectors have been hit hard this year as investors have grown more concerned about China’s future growth prospects. Some of the fund’s largest holdings, including online retailer JD.com JD , auto manufacturer Chongqing Changan Automobile , and electrical distributor Boer Power , have all lost more than 20% . Scott Mather and Jerome Schneider focus on the short end of the yield curve and have the freedom to invest in traditional core sectors—government debt and investment-grade debt—as well as high-yield debt and emerging-markets debt. The team’s decision to shorten the fund’s duration has proved costly recently, as global economic stagnation spurred a bond rally. K Contact Andrew Daniels at andrew.daniels@morningstar.com Bronze-rated PIMCO Low Duration PLDDX has lagged 87% of its short-term bond peers in 2016 . Comanagers

Leaders Artisan Value ARTLX has outperformed all but two of its peers for the year to date through April. That’s a welcome rebound for the fund, as it had trailed more than 90% of its large-value peers in the past three calendar years. The fund’s large overweighting to energy and basic materials hurt performance in the past but drove results this year as commodity prices rose. Big contributors to performance included energy firms Apache APA and Hess HES and gold-miners Kinross Gold KGC and Goldcorp GG —all four are up more than 20% this year. The team’s focus on firms with strong balance sheets also worked against it in past years but paid off in 2016 amid market volatility, as holdings such as Berkshire Hathaway BRK .B and Allstate ALL posted strong returns. Bronze-rated First Eagle Overseas SGOVX has excelled in 2016 , outperforming 99% of its foreign large-blend peers for the year to date. The fund’s heavy weighting in cash—currently around 15% — along with a perennial stake in gold bullion and the managers’ focus on valuation all helped it outper- form amid 2016 ’s market volatility. The fund also has an underweighting in hard-hit financials, and those that it does own—such as HAL Trust HAL and Great Eagle Holdings —have done well. Neutral-rated Fairholme Focused Income FOCIX has outperformed 99% of its high-yield bond peers in 2016 . Manager Bruce Berkowitz makes concentrated bets and has a preference for distressed bonds, so this fund offers plenty of risk. The fund’s bets have recently paid off—although they have long been sources of pain—as its large stake in Fannie Mae and Freddie Mac preferreds, its Chesapeake Energy bonds, con- vertibles, and preferreds, and its position in Seritage Growth Properties SRG have all done well.

Ten Best-Performing Funds

Fund Name

YTD Cat Rank %

Ten Worst-Performing Funds Fund Name YTD Cat Rank % Matthews China Investor 100 Scotia Dynamic U.S. Growt 99 Sequoia 99 Touchstone Sands Capital 99 Fidelity OTC 98 Janus Contrarian T 97 Natixis ASG Global Altern 97 Templeton Global Bond A 97 Artisan International Sma 96 Baron Opportunity Retail 96 Artisan Value Investor Champlain Mid Cap Adv 1 Fairholme Focused Income 1 First Eagle Overseas A 1 First Eagle US Value A 1 GoodHaven 1 Jensen Quality Growth J 1 Longleaf Partners 1 Longleaf Partners Interna 1 Longleaf Partners Small-C 1 1