(PUB) Morningstar FundInvestor

June 2 014

Morningstar FundInvestor

The Fantastic 48 Continued From Cover

3

FPA Capital FPPTX Keep an eye out for the day this Silver-rated fund reopens. Managers Dennis Bryan and Arik Ahitov want strong companies trading at modest valuations. It’s not easy to find many companies like that, and that’s why the fund has a big cash stake and is closed to new investors. The fund offers a nice way to get exposure to stocks while still playing defense. Franklin Income FKINX Franklin Income is a little like Berwyn Income, only on a much grander scale. This allocation fund also courts a fair amount of credit risk, only it does so with a massive $ 93 billion asset base. The fund’s sizable yield and strong performance in the rally have made it extremely popular. Remember, though, that yield requires credit risk, and there’s a price to be paid in years like 2008 . Harbor Capital Appreciation HACAX Harbor International HAINX These funds are cheapest when you buy them directly from Harbor with a minimum of $ 50 , 000 , but you can also buy slightly pricier share classes for $ 2 , 500 from fund supermarkets. In both cases, you have experienced managers plying a disciplined strategy. Harbor Capital Appreciation is a U.S. large-growth fund run by Sig Segalas and his associates at Jennison. Harbor International is a foreign large-blend fund run by Northern Cross. Both are standouts. LKCM LKCM Equity LKEQX and LKCM Small Cap Equity LKSCX are good below-the-radar funds run out of Fort Worth, Texas. Luther King has been using the same strategy since he founded the firm in 1979 . He’s a value investor in search of companies with strong cash flows and high returns on equity but trading at a modest valuation. King is joined in management by a trio of experienced hands who have helped guide the funds to steady results.

Mairs & Power Mairs & Power Balanced MAPOX and Mairs & Power Growth MPGFX have made an art of buying high-quality stocks that they can hold for a long time. Manager Bill Frels is set to retire at year-end, but the fund still passes the tests; his comanagers started in 2006 , and each has more than $ 1 mil- lion invested. MFS Massachusetts Investors Trust MITTX A drop to a 0 . 70% expense ratio has nudged this fund onto the list for the first time. Managers Kevin Beatty and Ted Maloney look for a slew of good growth and quality characteristics like strong cash flow, great management, and above-average earnings growth. Beatty is the longer tenured one, and since his 2004 start date, the fund has beaten the S & P 500 by nearly 100 basis points annualized. Mutual Quest MQIFX Likewise, Mutual Quest’s falling expenses have ele- vated it to our list. Unfortunately, the closed Z shares are the only ones to qualify. This fund is run the deep-value Mutual Series-way by the skilled Shawn Tumulty and Keith Luh. Primecap All six Primecap funds make the list. Three are from Vanguard, and the other three are under its Odyssey label. Two of those six remain open to new investors: Primecap Odyssey Growth POGRX and Primecap Odyssey Stock POSKX . Their outstanding analysts and managers simply outresearch the rest of the growth world. I suggest starting your growth search with these two funds and seeing if you can find one to top them. Selected American SLADX Yes, despite recent struggles and the departure of Ken Feinberg, this fund is still running more than 100 basis points a year ahead of the S & P 500 under Chris Davis’ watch. We took it down to Bronze when Feinberg left, but we still think Davis’ Buffett-inspired strategy should win in the end.