(PUB) Investing 2016

13

February 2016

Morningstar FundInvestor

Quality Limits Damage at Fidelity Small Cap Leaders & Laggards | Robert Goldsborough

but with low fees, the fund can thrive in whichever of the two categories it’s placed in. Over the past year, the fund outperformed its high-quality peer group because of its aggressive credit exposure during a rela- tively healthy muni credit environment. Ariel International Equity AINTX has continued to generate impressive performance, topping 98% of its foreign large-value peers during trailing one- and three-year periods. Its recent outperformance in a down market has followed benchmark-topping gains during up markets in 2013 and 2014 . The fund has benefited from a number of good value plays including Deutsche Boerse DB1 , Ahold NV , Nintendo, Ryanair Holdings RYAAY , Reckitt Benckiser, and Philip Morris PM . recently, lagging fully 94% of its large-growth peers over the past 12 months. Extreme performance is not rare for this fund, whose focused portfolio of just 18 stocks isn’t beholden to any index. However, the fund has been in a prolonged slump—it’s trailed 93% of peers during the past three years and nearly two out of three competitors over the past five years. Major detractors of late include investments in Qualcomm QCOM , Perrigo PRGO , Mead Johnson Nutrition MJN , Stericycle SRCL , and energy firms National Oilwell Varco NOV and Schlumberger SLB . Weitz Partners Value WPVLX has trailed 96% of its large-blend peers over the past 12 months. Three major positions have hurt performance: Avon Products AVP , Iconix Brand Group ICON , and Range Resources RRC , all of which fell more than 50% in 2015 . Managers Wally Weitz and Brad Hinton main- tain both a contrarian focus and a willingness to bet on firms in turnaround mode such as Avon. And while that’s common in the value space, investors should pay close attention the managers’ willingness to tolerate companies with above-average debt. K Contact Robert at robert.goldsborough@morningstar.com Laggards RiverPark Wedgewood RWGFX has struggled

Leaders Bronze-rated Fidelity Small Cap Stock FSLCX has posted terrific relative performance, topping 99% of its small-blend peers over the past year and losing 1 . 1% in the 12 months ended January 2016 . Lionel Harris looks for high-quality companies with dependable business models and seasoned manage- ment teams. Helping fuel the fund’s strong returns over the past year have been investments in Coca-Cola Bottling COKE , IT distributor Ingram Micro IM , medical-device maker LivaNova LIVN , IT outsourcing firm Genpact G, and software firms Global Payments GPN and SolarWinds SWI . Also benefiting the fund was a position in Synageva BioPharma, a biotech firm that was acquired shortly after the fund made an investment. Over the trailing 12 months, Oppenheimer Global Opportunities OPGIX has bested fully 95% of the funds in the world-stock category. Manager Frank Jennings runs a quirky, small-cap-heavy portfolio that often produces extreme results. Over the past year, this fund, which has large weightings in technology and health care, has enjoyed strong performance on the backs of investments in Swedish fingerprint- recognition technology firm Fingerprint Cards—which has surged from speculative status into a profitable, growing business—cancer-oriented biotech firm Genmab GEN , and boron chemical firm Anacor Phar- maceuticals ANAC , whose 250% return in 2015 was driven by a successful recent product launch and good results in drug trials for another drug. Silver-rated Vanguard High-Yield Tax-Exempt VWAHX has topped 94% of its competitors in the muni- national intermediate-term Morningstar Category in the past 12 months. The fund is run conservatively relative to most funds with a high-yield muni moniker,

Ten Best-Performing Funds

Fund Name

YTD Cat Rank %

FAM Value Investor FMI International

1 1 1 1

GoodHaven

Jensen Quality Growth J Matthews Asian Growth & I 1 Vanguard Interm-Term Bond 1 Vanguard LifeStrategy Inc 1 Vanguard Total Intl Bd Id 1 AMG Yacktman Service 2 ASTON/River Road Small Ca 2

Ten Worst-Performing Funds

Fund Name YTD Cat Rank % Dodge & Cox Global Bond 100 T. Rowe Price Media & Tel 100 CGM Focus 99 Dreyfus Opportunistic Sma 99 Fairholme 99 Fairholme Focused Income 99 Fidelity Leveraged Compan 99 Fidelity OTC Portfolio 99 Longleaf Partners Interna 99 Oppenheimer Global Opport 99