(PUB) Morningstar FundInvestor

November 2013

Morningstar FundInvestor

13

Vanguard Capital Opportunity Is Rocking Leaders & Laggards | Flynn Murphy

Laggards ASTON/Montag & Caldwell Growth MCGFX Despite posting double-digit returns so far this year, this fund trails 95% of large-growth peers. That’s not a surprise, as the fund’s emphasis on high quality at a modest price has worked best in turbulent markets such as 2008 and 2011 . This year, the fund’s larger stake in consumer defensive stocks hasn’t impressed, with top- 10 holdings Coca-Cola KO and Philip Morris International PM gaining just 11 . 5% and 9 . 8% , respectively. The fund’s health-care stock selection has hampered returns as well. Allergan AGN (a pharmaceutical developer and top holding here) has lost 1 . 1% , while health-care peers raced forward this year. Columbia Acorn International Select LAFAX This fund’s 14 . 5% return this year lags 90% of foreign small/mid-growth peers. A heavy weighting in mining firms weighed on returns, with gold miners such as Allied Nevada Gold ANV and Goldcorp GG taking double-digit losses this year. The fund also suffered from a larger stake in the sluggish global real estate sector. One of the fund’s largest holdings, Singapore- based Ascendas Real Estate Investment Trust ACDSF , gained a modest 3 . 7% so far this year. Vanguard High-Yield Corporate VWEHX This fund’s exposure to higher-quality high-yield bonds has helped it hold up better than peers when riskier credits sell off. However, a larger exposure to higher- rated, high-yield bonds and a preference for new issues makes the fund more interest-rate-sensitive than category peers. That sensitivity has hurt in this year’s rising-rate environment: The fund’s 3 . 9% gain this year lags more than 90% of category peers. œ Contact Flynn Murphy at flynn.murphy@morningstar.com

Leaders Vanguard Capital Opportunity VHCOX

Ten Best-Performing Funds

Fund Name

YTD Cat Rank %

This recently reopened fund’s 35 . 4% year-to-date return beats nearly all large-growth peers. The Primecap management team subadvising this fund follows a patient, contrarian growth strategy, hold- ing on to picks for years. A long-running stake in health-care stocks—particularly pharmaceutical and biotech firms—paid off as health-care stocks surged. The fund also benefited from top- 10 holding, LED -light and semiconductor manufacturer Cree CREE , which has gained nearly 80% thus far in 2013 . Mitch Milias, who is a comanager on some other Primecap funds, is set to retire at year-end. See Manager Changes on Page 14 for details. Dodge & Cox International Stock DODFX This foreign large-blend fund’s 22 . 5% return has out- paced more than 90% of category peers this year. The fund overcame a headwind posed by its outsized stake in flagging emerging-markets stocks with strong performance from its technology and health- care picks. The fund’s top holdings, South Africa- based Internet firm Naspers NPSNY and health-care titan Roche Holding RHHBY , were the top contri- butors to performance in 2013 . The fund’s patience with Hewlett-Packard HPQ also paid off, as the embattled tech holding rose more than 70% this year. T. Rowe Price High-Yield PRHYX This fund’s willingness to take on credit risk, rather than interest-rate risk, has paid off this year. Carrying a higher stake in riskier CCC rated bonds than it has in the past—while maintaining relatively low interest-rate sensitivity—this fund has navigated 2013 ’s rising-rate environment well. The fund’s 7 . 8% return beat more than 85% of category peers so far this year.

American Funds 2020 Trgt Artisan International Val

1 1 1

Berwyn Income

Dodge & Cox Balanced 1 Fairholme Focused Income 1 Oakmark International I 1 T. Rowe Price Media & Tel 1 Third Avenue Real Estate 1 Vanguard Capital Value In 1 Vanguard Precious Metals 1

Ten Worst-Performing Funds

Fund Name Appleseed

YTD Cat Rank %

99 Royce Low Priced Stock Sv 99 Amana Growth Investor 98 First Eagle US Value A 98 Royce Premier Invmt 98 Vanguard Long-Term Invest 98 Virtus Foreign Opportunit 98 FPA Capital 97 Fidelity Export & Multina 97 Meridian Growth Legacy 97