(PUB) Morningstar FundInvestor

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7 Funds for Your Tax Refund The Contrarian | Russel Kinnel

Vanguard Dividend Growth VDIGX (minimum $ 3 , 000 ) still holds a lot of appeal. As yield-chasing drives big-dividend stock prices up, this fund is a bit ahead of the curve as it’s looking for companies that should boost their dividends. The dividend doesn’t have to be that big today. Donald Kilbride has done an outstanding job executing that strategy, and the fund’s 9 . 8% aftertax 10 -year return lands in the top 2% of large-blend funds. Sequoia SEQUX (minimum $ 5 , 000 ) has moved to curb inflows by limiting new purchases to investors who go directly to the fund company. So, it’s a little less convenient than a fund you can buy through the supermarkets. However, management’s skill in finding great companies at modest prices makes it worth the hassle. Bob Goldfarb and David Poppe won’t put shareholders at risk by investing when stocks look too pricey. So, cash builds as the market surges. Today, cash is 16% of assets. Conestoga Small Cap CCASX (minimum $ 2 , 500 ) is pretty mild-mannered for a small-growth fund. Management looks for companies with strong fran- chises, modest debt, and high management owner- ship. We’ve looked closely at the pending transition of management at this fund and feel comfortable about it. William Martindale will retire in 2014 , but comanager Robert Mitchell will remain and Joe Monahan will become a comanager. Mitchell has been a comanager for more than a decade, so we remain confident here. Westport WPFRX (minimum $ 2 , 500 ) is an under-the- radar mid-cap fund worth knowing. The $ 600 million fund is in the hands of Ed Nicklin, who has been run- ning funds since 1986 and this fund since 1997 . The fund’s 15 -year return of 9 . 7% annualized is in the top 15% of the category. Nicklin looks for turnaround situations where a company can rebound to produce a high return on capital. His brand of turnaround investing isn’t to be confused with deep value, though. He tends to buy strong companies with one problem rather than companies on the verge of bankruptcy. You can see the difference in years like 2008 , when the fund’s 30 . 3% loss was much less than seen at deep-value funds. œ

Did you get a refund from the IRS ? I’ve got some rela- tively low-risk ideas for you.

Our Contrarian Approach I go against the grain to find overlooked funds that may be ready to rally.

By relatively low risk, I mean relative to other funds in the category. I screened for highly rated funds that are low-risk relative to their category, have above- average aftertax returns for the past 10 years, and a minimum investment of $ 10 , 000 or less. I’ve ordered them in absolute terms from lowest risk to riskiest. Fidelity Intermediate Municipal Income FLTMX (minimum $ 10 , 000 ) is a fine investment for the big-ticket bills you might have coming in a few years, such as a tuition bill, a house, or a car. The fund’s humble 1 . 4% 30 -day yield tells you to keep your expectations in check, but it’s a well-run, low- cost fund. Manning & Napier Pro-Blend Conservative Term EXDAX (minimum $ 2 , 000 ) typically holds about two thirds of its portfolio in bonds. Management employs a value strategy for equities and invests in high- quality bonds on the fixed-income side. It will shift its asset mix a bit as it has discretion to move equities between 15% and 45% of the portfolio. Its aftertax return for the trailing 10 years is a pleasing 5 . 1% , which tops 70% of the conservative-allocation group. First Eagle Overseas SGOVX (minimum $ 2 , 500 ) is a broker-sold fund that’s all about protecting on the downside. The team runs a flexible value approach focusing on foreign stocks and corporate bonds. The fund also typically holds a slug of cash and gold to help preserve capital. Matthew McLennan, Kimball Brooker Jr., and Abhay Deshpande look for healthy companies trading at a sizable discount to their esti- mates of intrinsic value. That discount helps limit likely losses if things go south. The fund’s losses in 2008 and 2011 were much smaller than most peers’.