(PUB) Morningstar FundInvestor

June 2014 Vol. 22 No. 10

FundInvestor Research and recommendatio s for the s riou fund investo

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The Fantastic 48

Let’s tackle the 48 in alpha order:

American Funds Quite a few of American’s domestic-stock funds have outlegged their benchmarks over a very long stretch. American employs multiple managers operating inde- pendently in its equity funds. They tend to be quite experienced, and the resulting portfolio can be rather diffuse. However, low costs and long tenure have led to excellent but not very exciting results. Six of its domestic-stock funds have beaten their benchmarks over the longest-tenured manager’s tenure: American Funds AMCAP AMCPX , American Funds Amer- ican Mutual AMRMX , American Funds Fundamen- tal Investors ANCFX , American Funds Growth Fund of America AGTHX , American Funds Invest- ment Company of America AIVSX , and American Funds Washington Mutual AWSHX . Two allocation funds, American Funds American Balanced ABALX and American Funds Capital Income Builder CAIBX , have also delivered smooth rides by adding bonds to the mix. Finally, Ameri- can Funds NewWorld NEWFX —a mix of emerging markets plus global equities—completes the list. Berwyn Income BERIX This is a nice little conservative-allocation fund that keeps on chugging along. It can’t have more than 30% in stocks, yet it has been a respectable performer in the recent rally thanks to a corporate-bond stake and some good stock selection. Management buys stocks of dividend payers with solid balance sheets as well as corporate bonds, convertibles, and preferred stocks. Thus, it’s worth noting the fund does take on some credit risk.

RusselKinnel, Director of FundResearch and Editor

Fund Reports

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It’s time once again for the Fantastic 48 , a list of funds that pass some high hurdles.

Artisan Small Cap Value Met West Total Return Bond USAA World Growth

I figure, with so many funds out there, why not be choosy? You want great managers, low costs, good stewardship, and managers who eat their own cooking. That’s why I insist on funds that pass all eight tests, below. My criteria: p Must beat the fund’s benchmark since the start date of the longest-tenured manager p Must have expense ratios in the cheapest quintile of the category p Must have a manager with at least five years’ worth of experience p Must have a Morningstar Analyst Rating of Bronze or better p Must have a positive Parent rating p Must have at least one manager with at least $ 500 , 000 or more invested p Must have overall Morningstar Risk that is not High p Must not be limited to institutional investors All told, just 48 funds passed those tests out of more than 7 , 000 . That’s three fewer than last year. You can see all 48 in the accompanying table. Vanguard led the way with 12 funds, followed by American with nine, and T. Rowe Price with five.

Morningstar Research

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Buy the Stock-Pickers, Not the Sector-Pickers

The Contrarian

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Two Funds on My Buy List

Red Flags

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Three Negative-Rated Funds

Market Overview

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Leaders & Laggards

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Manager Changes and News

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Portfolio Matters

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Avoid These Four Longevity Mistakes

Tracking Morningstar

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Analyst Ratings

Income Strategist

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Bond Funds Are a Better Bet Than Bonds

FundInvestor 500

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FundInvestor 500 Spotlight

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Follow Russ on Twitter @RussKinnel

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