(PUB) Investing 2016

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Two Load Funds Join the M500 Changes to the 500 | Russel Kinnel

American Century Select TWCIX is the third new addition. Keith Lee and his team look for companies with strong competitive advantages that can produce stable growth. They combine fundamental analysis with quantitative momentum data to build a fairly focused growth portfolio. The fund has 54 holdings and 38% of assets in the top 10 names. They own many of the best-known growth names in their top 10 including Apple AAPL , Amazon.com AMZN , Face- book FB , and Alphabet GOOG . Three Go Out To make room, I’m dropping three funds that have shrinking assets due to poor to middling returns. Neutral-rated Buffalo Small Cap BUFSX has been losing managers, assets, and our confidence, so it is going out. Royce Micro-Cap RYOTX is a 1 -star fund that has seen some manager changes of its own, so it is also being dropped. Finally, I’m cutting Baron Opportunity BIOPX , a pricey 2 -star fund that has not lived up to its earlier promise. K

As I wrote in The Contrarian, the lines between load and no-load funds have increasingly blurred. No matter how you buy your funds, you probably have access to a wide array of both traditional no-load and load firms. As the lines blur, fund companies find they can cross them without angering their long- standing advisor or investor bases. More official load funds are now available in No Trans- action Fee supermarkets. I’m taking advantage of that change to upgrade our U.S. equity fund coverage a bit. I’m adding two funds that typically have sales charges that are now available with loads waived in NTF plans, as well as one from a traditional no-load shop. That enabled me to get rid of three of the less popular, more disappointing equity funds in the M 500 . Now that deep value firm Hotchkis & Wiley is acces- sible in NTF platforms, I’m adding Hotchkis & Wiley Value Opportunities HWAAX . The large-value fund has a Morningstar Analyst Rating of Bronze and the potential for strong returns when deep value is in favor, though it does have its ups and downs. George Davis and David Green have run the fund since its 2002 inception, and they’ve produced strong returns that are well ahead of peers and benchmark. How- ever, the fund did get burned in the 2008 bear market, so know the risks before you buy. See the facing page for more details. I’m also adding JPMorgan Equity & Income OIEIX . This Silver-rated fund generally provides a smoother ride than the Hotchkis fund. Its A shares are in NTF platforms with an expense ratio of 1 . 04% . Manager Clare Hart has done a strong job of balancing the need for yield with the safety of strong balance sheets. Thus, the fund doesn’t have the highest yield of an equity-income fund, but it has better downside protec- tion. In fact, its 2008 loss was in the best decile of the large-value Morningstar Category.

What is Morningstar FundInvestor 500 ? The Morningstar FundInvestor 500 features the industry’s best and most notable funds. Use the list to get new in- vestment ideas and track the funds you already own. FundInvestor subscribers have access to one-page monthly reports on all 500 funds on mfi.morningstar.com. Just type in the name or ticker of the fund in the search box.

Summary of Changes

Rating Change (Upgrades)

Ticker

From

To

Fidelity Four-in-One Index

FFNOX

• Œ

Fidelity Puritan

FPURX

´ •

Vanguard Growth & Income

VQNPX

‰ ´

Rating Change (Downgrades)

From

To

Natixis ASG Global Alternatives

GAFAX

´ ‰

Weitz Hickory

WEHIX

• ´

Weitz Partners Value

WPVLX

• ´

New Ratings

To

American Century Select

TWCIX

´ ´

Hotchkis & Wiley Value Opps

HWAAX

Litman Gregory Masters Intl

MSILX

´

Loomis Sayles Gbl Eqty and Income LGMAX

´

Parnassus

PARNX

´

PIMCO RAE Fundamental Adv PLUS PFSDX

‰

USAA Income

USAIX

‰

Vanguard Tax-Managed Bal

VTMFX

Œ