(PUB) Morningstar FundInvestor

18

Looking at This Year’s Notable Performers Tracking Morningstar Analyst Ratings | Russel Kinnel

rallies. The fund invests in other commodity producers, including diamond, potash, and copper miners. That added level of diversification moderates the extremes of dedicated gold funds, although obviously it still can get hit. All that and the fund’s low costs earn it a Gold rating. Matthews India MINDX is down 15% this year; that’s better than the typical India fund. We’re big fans of Matthews because of its skill and depth at covering Asia. Thus, the fund is rated Silver. That said, India is going through a difficult time as struc- tural flaws have hammered the economy and the markets. India has a new central bank chief who hopes to restore confidence, but it looks like a tough job. Top Three We rate Primecap Odyssey Aggressive Growth POAGX Gold because it boasts an excellent team of growth investors, a good strategy, and low costs. This year a number of health-care and biotech stocks have been a boon. While this is a great long-term holding, be ready for some rough patches. This year it is up 44 . 8 % —topping all of its peers. However, the last time it topped its peers was 2006 , and the following year it lagged by a massive 1 , 500 basis points. As with the other two funds on this list, a sell-off in health-care names would really sting. T. Rowe Price Health Sciences PRHSX is having a great year, but we rate the fund Neutral because manager Kris Jenner bolted and took two analysts with him. That was a real setback for the fund, and it makes me wary of this fund’s prospects. Fidelity Select Health Care FSPHX is up 38 . 1% , topping most of its health-care peers. We tend to rate Fidelity Select funds either Neutral or Bronze because they are cheap and have some good analyst support but suffer from too much manager turnover. Ed Yoon has been on the fund since 2008 , and his tenure and strong record over five years tips this fund into Bronze. Fidelity’s sector fund managers can stay at their funds rather than become managers of big di- versified funds. Yoon’s tenure suggests he wants to make a career out of it, so we rate it Bronze. œ

Morningstar Analyst Ratings take the long view. We’re looking at a fund’s long-term prospects for risk- adjusted returns that are better than their category and benchmark. When performance is extreme, however, fear and greed can overwhelm investors. With that in mind, I thought I’d take a look at some of the highest and lowest year-to-date returns in the Morningstar 500 . Bottom Three Precious metals and emerging markets have been about the worst performers for the year. In particular, gold and India have really gotten hammered. In both cases, it’s due in part to signs that the Fed will taper off its bond purchases, making for a stronger dollar and higher interest rates. The two funds with the big- gest losses were precious-metals funds followed by an India fund. Although their categories have been awful, the bottom three funds have actually had respectable performance relative to their peers. Two have outperformed, and one is only a bit behind the average. Our biggest loser is Oppenheimer Gold & Special Minerals OPGSX , which is down a nasty 41 . 1% for the year to date. We rate it Silver because of its deft management among big and small miners. However, it’s aggressive enough that it tends to outperform in rallies and get punished in down markets. Thus, its per- formance is not out of character this year, and we still have faith. Vanguard Precious Metals and Mining VGPMX follows a more diffuse strategy that gets it well beyond precious metals. Thus, its 32 . 9% loss actually tops its category. This makes it a more broad infla- tion hedge than most of the competition, but it also means it’s not going to make you a mint when gold

What Are Morningstar Analyst Ratings?

Our ratings are chosen for long- term success. Analysts assess a fund’s competitive advantages by analyzing people, process, parent, performance, and price. They do rigorous analysis and then submit their ratings to a committee that vets their work for thoroughness and consistency.