(PUB) Morningstar FundInvestor

October 2013

Morningstar FundInvestor

13

Dennis Lynch Having a Strong 2013 Leaders & Laggards | Flynn Murphy

Laggards Dreyfus Appreciation DGAGX

This fund is lagging because of its long-term commit- ment to energy stocks. Its 20% allocation to energy firms was nearly double the S & P 500 Index’s weight- ing as of July 2013 . That overweighting, coupled with poor energy stock selection, has served as a head- wind in 2013 . The fund’s 11 . 7% return for the year to date lags nearly all large-blend peers, with holdings such as Royal Dutch Shell RDS .A in negative terri- tory for the year. Virtus Foreign Opportunities JVIAX The fund’s 3 . 8% return this year lags its typical foreign large-growth peer’s returns by roughly 8 percentage points. An overweighting to the consumer defensive sector held the fund back, as picks such as Unilever UL delivered lackluster returns. An outsized stake in Indian firms such as Housing Development Finance Corp HDFC also weighed on returns. Finally, the fund suffered from a stake in gold miners, with holdings such as Goldcorp GG detracting from performance. T. Rowe Price Small-Cap Value PRSVX An allocation to flagging mining firms also weighed on this small-blend fund’s performance in 2013 , while energy firms such as Northern Oil & Gas NOG and coal producer Cloud Peak Energy CLD also chipped away at returns. The fund’s defensive nature has caused it to lag in most rallies, though recent perform- ance has been particularly pronounced: The fund’s 21% return this year lagged nearly 90% of peers. The fund is in the midst of a transition. Preston Athey is retiring, and David Wagner will take over in June 2014 . Wagner became a comanager on Sept. 30 , 2013 . Transitions like this one have usually been quite smooth at T. Rowe. œ Contact Flynn Murphy at flynn.murphy@morningstar.com

Leaders Morgan Stanley Focus Growth AMOAX

Ten Best-Performing Funds

Ten Worst-Performing Funds Fund Name YTD Cat Rank % Royce Low Priced Stock Sv 99 Amana Growth Investor 98 First Eagle US Value A 98 Hussman Strategic Total R 98 PIMCO Inflation Response 98 Schneider Small Cap Value 98 ASTON/Montag & Caldwell G97 Appleseed 97 Fidelity Export & Multina 97 Madison Mid Cap Y 97 Fund Name YTD Cat Rank % American Funds Trgt Date 1 Artisan International Val 1 Berwyn Income 1 Fairholme Focused Income 1 Fidelity Municipal Income 1 Oakmark International I 1 PIMCO Fundamental Advtg A 1 T. Rowe Price Media & Tel 1 Vanguard Capital Value In 1 Vanguard Precious Metals 1

This fund gained 31 . 5% for the year to date, better than 98% of its large-blend peer group. Manager Dennis Lynch and team hold a concentrated portfolio of about 30 stocks, focusing on companies with dominant market positions and a history of generat- ing high returns on capital. The fund’s returns can be volatile, though they’ve re- warded patient shareholders. The fund’s strong returns since the start of the year stem from a hefty stake in resurgent Internet stocks such as Facebook FB and Groupon GRPN and a stake in Tesla TSLA , which has returned more than 470% this year. Artisan International Value ARTKX This closed fund has outpaced nearly all foreign large- blend category peers during the trailing three-, five-, and 10 -year periods. Managers David Samra and Dan O’Keefe seek companies with low debt levels trading at a discount to their private market value. The fund’s category-leading 21 . 8% return thus far in 2013 has been fueled by a variety of tech firms, including electrical connector manufacturer TE Con- nectivity TEL and Chinese search engine Baidu BIDU . However, the stock market’s runup has left the managers with a shortage of companies that meet their valuation criteria. The fund’s cash stake rose to its all-time high of more than 11% as of mid- 2013 . FMI Focus FMIOX This small-blend fund’s 31 . 9% return for the year beats most category peers. The fund has benefited from stock selection in the consumer cyclical sector, as mar- keting firm MDC Partners MDCA and apparel manufacturer Fifth & Pacific Companies FNP have posted triple-digit returns this year.