(PUB) Investing 2016

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Top Picks From Top Stewards Tracking Morningstar Analyst Ratings | Russel Kinnel

T. Rowe Price Dividend Growth PRDGX This Silver-rated fund has long plied a dividend-growth strategy, yet it has a modest $5 . 5 billion under management. Tom Huber has done a fine job since he took over in 2000 . He looks for firms with strong balance sheets and robust cash flow. His wariness of energy and other commodity producers has made for a smoother ride. It resides in the top decile of its peer group over all the long-term trailing periods. T. Rowe Price isn’t known as a quantitative shop, but lo and behold, this fund has done quite nicely with a diffuse quant strategy. Sudhir Nanda turned this fund into a champ when he took over in 2006 . It combines models that focus on valuation, earnings quality, and balance sheets. Nanda and team continue to test for ways to improve the models. The fund’s 10 -year returns are in the top decile of its Morningstar Category. Vanguard Developed Markets Index VTMGX This is an outstanding core holding, and it will only cost you 9 basis points. Many funds charge more for investing your money overseas, but this fund shows you don’t have to go that route. Like a good steward, Vanguard continues to research the science of indexing, and it regularly upgrades its funds’ bench- marks when possible. This fund recently moved from the FTSE Developed ex-North America Index to the FTSE Developed All Cap ex- US Index. It’s a minor change that adds Canadian stocks and some small-cap stocks, but it shows that Vanguard is still working to improve results. Vanguard High-Yield Tax-Exempt VWAHX This Silver-rated fund gives you a little more yield for a little more credit risk. It’s well designed, as Vanguard was wary of taking on as much risk as most high- yield muni funds. Results have been solid, though they are not quite as good as they seem versus the muni-national intermediate peer group, which is even higher-quality. The Vanguard fund is on the border between that group and muni high yield, but it looks fine either way. K T. Rowe Price QM U.S. Small-Cap Growth Equity PRDSX

You don’t often have a bad experience when you invest with a firm that gets an A for its Morningstar Stewardship Grade. To get an A, a firm must have a strong culture and a history of doing the right thing for investors. To illustrate, I’ve selected six funds from A stewards from different categories. Each has low costs, a sound strategy, solid performance, and very stable management. If you have all of those things, you’ve got a pretty good chance at success. American Funds New Perspective ANWPX American Funds has proved quite adept at investing overseas, and this world-stock fund shows why. The firm has long had one of the largest global equity analyst staffs, and that’s important when you are managing a $59 billion fund like this one. But more important than quantity is quality. The analysts are seasoned and skilled, as are the portfolio managers. A modest 0 . 75% expense ratio helps those picks to shine through for this fund, which has a Morningstar Analyst Rating of Gold. Its trailing returns are top- quartile for the three-, five-, 10 -, and 15 -year periods. Dodge & Cox Income DODIX A chunk of the money fleeing PIMCO Total Return PTTRX after Bill Gross’ departure wound up at this fund. It’s easy to see why as Dodge has one of the most stable manager and analyst staffs around, and thus may be a welcome option for those fatigued with corporate intrigue. The fund is also a more straightforward vehicle than PIMCO Total Return. While the latter is largely a collection of macro bets made with derivatives and a side of issue selection, Dodge & Cox Income is primarily driven by issue selection, and it doesn’t bother with derivatives. The fund mostly owns corporate bonds and mortgages. No big bets on currencies will be found here. Its long-term trailing returns are all in the top third of its peer group.

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.