(PUB) Investing 2016

13

September 2016

Morningstar FundInvestor

T. Rowe Price Dividend Growth in a Groove Leaders & Laggards | Andrew Daniels

Laggards Neutral-rated Marsico Focus MFOCX has lagged 96% of its large-growth peers thus far in 2016 . The fund is down 2% this year, but the S & P 500 is up about 8% . The main culprit has been bad stock selection in the healthcare sector. Drug manufacturer Pacira Pharmaceuticals PCRX is down nearly 50% this year, while biotech Regeneron Pharmaceuticals REGN dropped more than 30% before it was sold in March. Additionally, the fund’s overweighting to poor-performing consumer cyclicals stocks such as Chipotle Mexican Grill CMG and Nike NKE have dented results. Bronze-rated Litman Gregory Masters Select Inter- national MSILX has lagged 98% of its foreign large- blend peers in 2016 . Several European financials such as Lloyds Banking Group LLOY and Credit Suisse CSGKF have plunged more than 20% this year. The fund also has a substantial overweighting to the United Kingdom, and the British pound’s decline in the wake of the Brexit vote hurt the fund’s returns in U.S. dollar terms. The fund also owned Valeant Pharmaceuticals International VRX —which plum- meted over questions about its business strategy— and Allergan AGN , which fell after its planned merger with Pfizer PFE fell apart. Fidelity Puritan FPURX has underperformed 81% of its allocation— 50% to 70% equity peers for the year to date. Subpar stock selection in the healthcare sector— most notably Allergan—and the industrials sector dragged results down. However, it is still in the top decile for the trailing three- and five-year periods. K Contact Andrew Daniels at andrew.daniels@morningstar.com

Leaders T. Rowe Price Dividend Growth PRDGX , with a Morningstar Analyst Rating of Silver, has been a top performer for the year to date, outperforming 93% of its large-blend peers. Strong selection in the health- care sector helped returns: Drug manufacturer Pfizer PFE , healthcare plan provider UnitedHealth Group UNH , and medical-device producer Becton Dickinson BDX are all up double-digits this year. The fund has also benefited from its lack of exposure to poor-performing biotech stocks. The fund’s over- weighting to strong-performing industrials stocks has also contributed to results. Top individual picks in the industrials space include business-services firm Iron Mountain IRM and security firm Tyco Inter- national TYC , both of which are up more than 35% this year. Vanguard International Growth VWIGX has outper- formed 90% of its foreign large-blend peers so far in 2016 . This fund tends to invest more in emerging- markets stocks than most of its peers. That hurt the fund in 2015 and for the first two months of 2016 as emerging stocks fell sharply, but it has helped propel the fund back to a top-decile year-to-date return through Aug. 31 , 2016 , thanks to the rebound of semiconductor firm ARM Holdings ARM , online- retailer MercadoLibre MELI , and apparel designer Adidas ADS , which are up more than 40% this year. Gold-rated Loomis Sayles Investment Grade Bond LIGRX has outperformed 96% of its intermediate- term bond peers in 2016 . Longtime manager Dan Fuss follows a contrarian approach and has flexibility to invest in non-U.S.-denominated fare, including both sovereign and corporate debt. The fund’s corporate credit stake has helped drive results this year, thanks in part to rebounding commodity prices, which boosted the prices of its energy and basic-materials holdings.

10 Best-Performing Funds

Fund Name

YTD Cat Rank %

Artisan Value Investor Champlain Mid Cap Adv

1 1 1 1 1

Longleaf Partners

Mairs & Power Growth Inv Permanent Portfolio Perma Vanguard High-Yield Tax-E 1 Champlain Small Company A 2 Fidelity New Millennium 2 Franklin Income A 2 JOHCM International Selec 2

10 Worst-Performing Funds

Fund Name YTD Cat Rank % Artisan International Sma 100 Matthews China Investor 100 Matthews India Investor 100 FPA US Value 99 Sequoia 99 Litman Gregory Masters In 98 Oakmark Global I 98 Scotia Dynamic U.S. Growt 98 Touchstone Sands Capital 98 Dreyfus Opportunistic Sma 97