(PUB) Investing 2016

3

November 2016

Morningstar FundInvestor

Small Growth Most long-tenured small-growth funds in the Morn- ingstar 500 have outlegged Vanguard Small Cap Growth Index VSGAX , including some that were recently mired in slumps. Neuberger Berman Genesis NBGNX stands at the head of the pack, though it takes a fairly bumpy ride to get there. Judy Vale and Bob D’Alelio tilt a little to the value side, more than most small-growth funds, and that gave the fund a real edge back in 2000 – 02 . Worries about the fund’s hefty $10 billion asset base have led us to hold the rating to Bronze, but it certainly has rewarded patient investors. I was surprised to see Royce Premier RYPRX so high on the list given its poor five-year returns. However, the fund held up quite nicely in the two bear markets, and it is actually having a good 2016 . Two things have changed about the fund over that time. First, comanager Whitney George, whose fondness for materials stocks was a big cause of the recent slump, was let go. Chuck Royce has remained as the other comanager throughout the time, however. Second, the fund long held a lot of cash, which reduced volatility quite nicely, but a flood of outflows has brought cash down to nearly zero. So, the first change may have reduced risk but the second clearly raised risk. This rocky road tempers our en- thusiasm despite the strong record over the two full cycles, leading us to a Bronze rating. Small Blend Small caps are where it is easiest to beat the index, right? Well, in the heart of small blend, the answer is clear as mud. Bridgeway Ultra-Small Company Market BRSIX had the third-best Sortino ratio, Vanguard Tax-Managed Small Cap VTMSX was fifth, and Vanguard Small Cap Index VSMAX finished in ninth place out of nine funds. That’s kind of strange, isn’t it? (I have published the small-blend and small-value tables on mfi.morningstar.com .) Continued on Page 4

Large-Growth Funds Over 2 Full Market Cycles

Morningstar Analyst Rating • • Œ Œ • Œ • ´ ´

Sortino Ratio 03/01/00 to 09/30/16

Return % 03/01/00 to 09/30/16

Manager Tenure (Longest),Years

Name

Ticker

Jensen Quality Growth

JENSX

0.66

6.94

23.75

Fidelity Contrafund

FCNTX

0.63

6.82

26.08

Vanguard Capital Opportunity

VHCOX

0.55

7.33

18.67

American Funds AMCAP

AMCPX

0.55

6.35

20.42

LKCM Equity

LKEQX

0.52

5.93

20.75

Vanguard Primecap

VPMCX

0.51

6.46

31.33

T. Rowe Price Blue Chip Growth

TRBCX

0.42

5.42

23.33

American Funds Growth Fund of Amer AGTHX

0.42

5.29

22.92

Amana Growth

AMAGX

0.42

5.22

22.67

Litman Gregory Masters Equity

MSEFX

—

0.41

5.34

19.83

Parnassus

PARNX

0.40

5.17

31.83

´ •

ClearBridge Aggressive Growth

SHRAX

0.38

5.12

33.00

American Funds New Economy

ANEFX

0.30

4.01

25.75

Œ

AMG Managers Montag &Caldwell Grw MCGFX

0.29

3.71

21.92

´ • •

Vanguard Growth Index

VIGAX

0.29

3.79

21.83

Fidelity Growth Company

FDGRX

0.26

3.50

19.75

Harbor Capital Appreciation

HACAX

0.22

3.05

26.42

Œ

American Century Growth

TWCGX

0.21

2.89

19.08

ˇ ˇ

Marsico Focus

MFOCX

0.20

2.81

18.83

Large-Blend Funds Over 2 Full Market Cycles

Morningstar Analyst Rating

Sortino Ratio 03/01/00 to 09/30/16

Return % 03/01/00 to 09/30/16

Manager Tenure (Longest),Years

Name

Ticker

Oakmark

OAKMX

0.86

9.89

16.58

Œ

Amana Income Investor

AMANX

0.82

7.84

26.75

´ Œ •

Oakmark Select

OAKLX

0.79

9.61

19.92

T. Rowe Price Dividend Growth

PRDGX

0.68

7.29

16.58

Gabelli Asset

GABAX

—

0.60

7.19

30.58

Weitz Partners Value Investor

WPVLX

0.59

6.66

33.33

´

American Funds Fundamental Invs

ANCFX

0.58

6.93

23.58

Œ

Longleaf Partners

LLPFX

0.58

7.66

29.50

ˇ • ´ ´

American Funds Invmt Co of Amer

AIVSX

0.57

6.25

24.58

Selected American Shares

SLADX

0.47

5.63

21.83

Davis NY Venture

NYVTX

0.45

5.45

21.00

Vanguard Total Stock Mkt Idx

VTSAX

0.39

5.00

21.83

Œ Œ

Vanguard 500 Index

VFIAX

0.39

4.82

0.50

Dreyfus Appreciation

DGAGX

0.37

4.34

25.83

´ •

Bridgeway Blue Chip 35 Index

BRLIX

0.35

4.31

19.25

Torray TORYX is our one laggard. The fund got burned on some financials and vulnerable cyclical stocks in the 2008 - 09 bear market. It has bounced around quite a bit from year to year, hurting risk-adjusted results.