(PUB) Investing 2016

13

November 2016

Morningstar FundInvestor

Tech Stocks Power Parnassus Leaders & Laggards | Andrew Daniels

Laggards Bronze-rated First Eagle Fund of America FEAFX has underperformed 97% of its mid-cap-blend peers for the year to date. The fund has suffered from bad bets in healthcare. The primary culprit was Valeant Pharma- ceuticals International VRX , which the fund held until May 2016 as the stock plummeted. Other detractors in healthcare include drug manufacturers Allergan AGN and Teva Pharmaceuticals TEVA and biotech firm Halozyme Therapeutics HALO —all are down more than 30% this year. The fund has also been hurt by subpar stock selection in the industrials sector: Industrial products firm Pitney Bowes PBI and car rental firm Hertz Global Holdings HTZ are down double-digits. Gold-rated Oakmark Global OAKGX has struggled this year, underperforming 93% of its world-stock peers. The managers’ value-oriented strategy has led them to give an overweighting to financials in recent years, and that has hurt the fund this year as the sector posted weak results. Banks such as Credit Suisse and Julius Baer Gruppe are down more than 15% this year. The fund has also been hurt by its overweighting to poor- performing auto stocks such as Daimler DAI , Toyota Motor , and General Motors GM . Furthermore, the fund has had minimal exposure to the dividend-heavy consumer defensive, utilities, and communications sectors—all have posted solid gains as investors contin- ue to hunt for yield in this low-interest-rate environment. Neutral-rated Nataxis ASG Global Alternatives GAFAX has posted poor performance this year, losing 8% and underperforming 95% of its multialternative peers through October 2016 . The fund’s short exposure to rallying fixed-income positions and its long exposure to choppy global equities dragged on results, particu- larly in early 2016 . (We are removing this fund from the Morningstar 500 .) K Contact Andrew Daniels at andrew.daniels@morningstar.com

Leaders Bronze-rated Parnassus PARNX has outperformed 83% of its large-growth peers for the year to date. The fund’s overweighting to strong-performing tech- nology stocks—amounting to more than 30% of assets as of September 2016 —have contributed to results. Within tech, the fund’s semiconductor holdings such as Applied Materials AMAT , Qualcomm QCOM , and Micron Technology MU are all up more than 20% this year; navigation technology firm Trimble TRMB is up nearly 30% . Furthermore, the fund’s underweighting to consumer cyclicals stocks contrib- uted to results, and those it does own, such as eBay EBAY and Belmond BEL , have done well. Gold-rated Dodge & Cox Global Stock DODWX has outperformed 96% of its world-stock peers thus far in 2016 . The fund was helped by its overweighting to technology stocks such as hardware firms Corning GLW , HP HPQ , and NetApp NTAP —all are up more than 25% this year. Strong stock selection in energy and con- sumer cyclicals also drove returns. Within energy, contributors included Petroleo Brasileiro Petrobras PBR .A, which is up more than 200% this year, and Apache APA . Within consumer cyclicals, top performers included Time Warner TWX —which recently announced plans to be acquired by AT&T T—and Priceline PCLN . Silver-rated Western Asset Core Plus Bond WACPX has posted strong results in 2016 , outperforming 88% of its intermediate-term bond peers. The fund’s managers have done a great job managing duration in the past, and shortening duration as the year progressed proved to be a good move. Additionally, the fund’s lack of exposure to agency mortgages and its overweightings to high-yield and emerging-markets debt helped drive results this year.

10 Best-Performing Funds

Fund Name

YTD Cat Rank %

10 Worst-Performing Funds Fund Name YTD Cat Rank % Artisan International Sma 100 FPA US Value 100 Matthews India Investor 100 Fidelity Leveraged Compan 99 Sequoia 99 AMG Managers Montag & Cal98 Artisan International Inv 98 Matthews China Investor 98 Scotia Dynamic U.S. Growt 98 Fidelity Independence 97 Artisan Value Investor 1 Fidelity New Millennium 1 JOHCM International Selec 1 Longleaf Partners 1 Longleaf Partners Interna 1 Manning & Napier Equity S 1 PIMCO Inflation Response 1 Permanent Portfolio Perma 1 Vanguard High-Yield Tax-E 1 Champlain Mid Cap Adv 2