(PUB) Morningstar FundInvestor

January 2 014

Morningstar FundInvestor

13

Oakmark Fund Finishes 2013 on Top Leaders & Laggards | Flynn Murphy

consistently outpaced its typical peer over longer stretches. Its 14 . 3% return in 2013 placed it ahead of nearly all peers.

Laggards BBH Core Select BBTEX

Despite gaining 26 . 5% in 2013 , this large-blend fund lagged more than 85% of its peers in part because of a sizable cash stake posing a headwind. The fund’s managers are having difficulty finding solid busi- nesses with strong cash flows trading at discounts to their estimated intrinsic value. In turn, they’re hold- ing a double-digit cash stake, which is higher than normal. Holdings such as medical instrument firm Baxter International BAX and retailer Target TGT also weighed on results during the year, as they gained just 7 . 2% and 9 . 6% in 2013 , respectively. Scout International UMBWX This foreign large-growth fund struggled from a poorly timed move into Japanese stocks in 2013 . Manager Jim Moffett increased the fund’s traditionally low stake in Japan—but not until later in the year, after Japan’s early-year rally had boosted peers and the MSCI EAFE Index benchmark. Materials sector hold- ings also detracted from returns, with Chilean chem- ical and mining company Sociedad Quimica y Minera de Chile SQM losing half its value in 2013 . While long-term results remain strong, this fund’s 13 . 1% gain in 2013 notably lagged the benchmark’s 22 . 8% return. Fidelity Strategic Real Return FSRRX This fund, which is designed to provide inflation pro- tection, lost money in 2013 as inflation remained relatively tame. The fund’s stake in slumping commod- ities and U.S. Treasury Inflation-Protected Securities (more than 50% of assets combined as of September 2013 ) contributed to its 2 . 2% loss and bottom-decile showing versus conservative-allocation peers in 2013 . Other inflation-fighting allocation funds have suffered similar setbacks. œ Contact Flynn Murphy at flynn.murphy@morningstar.com

Leaders Oakmark OAKMX

Ten Best-Performing Funds

Fund Name

YTD Cat Rank %

Good stock picks in the tech sector and an over- weighting to the rebounding financials sector helped push this fund to the front of the pack in 2013 . The fund returned 37 . 3% in 2013 , reaching the large-blend category’s top decile. Top contributors included electrical component manufacturer TE Connectivity TEL and MasterCard MA —holdings since 2007 and 2010 —which gained 51% and 71% , respectively, during the year. The fund also had a boost from top- 10 holding FedEx FDX , which gained more than 50% during 2013 as the firm increased margins and captured more of its clients’ shipping budgets. Fidelity Diversified International FDIVX After a stretch of middling performance during the mid- to late- 2000 s, manager Bill Bower has led this mutual fund to a second straight year of peer-beating results. The fund’s 25 . 2% return in 2013 topped the bench- mark MSCI EAFE Index’s gain by more than 2 . 5% and outpaced most foreign large-blend peers. The fund benefited from Bower recently increasing the fund’s stake in financials, believing valuations in the sector have reached a bottom. The fund’s second-largest holding, Japanese financial-services group Orix Corp- oration IX , gained more than 90% during 2013 . Bower’s cyclical picks also paid off, with Galaxy Enter- tainment Group GXYEY , a casino and resort oper- ator in Macau, posting triple-digit gains in 2013 . Vanguard Tax-Managed Balanced VTMFX This fund’s elevated equity stake relative to conserva- tive-allocation peers helped in 2013 ’s rising markets. The fund splits its assets evenly between a basket of high-quality municipal bonds and a basket of stocks with a lower dividend yield than the Russell 1000 Index to reduce the tax burden for shareholders. The muni-bond side was a drag on returns, but the equity weighting overcame that handicap. The fund has

Artisan International Val

1 1

Berwyn Income

Dodge & Cox Balanced 1 Fairholme Focused Income 1 Morgan Stanley Focus Grow 1 Skyline Special Equities 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 Virtus Foreign Opportunit 98 American Century Equity I 97 FPA Capital 97 Fidelity Export & Multina 97 GoodHaven 97 Royce Micro-Cap Invmt 97