3
Morningstar FundInvestor
April 2
014
Yet some value funds, particularly small-value funds,
found a way in, too.
Royce Opportunity
RYPNX
,
Skyline Special Equities
SKSEX
, and value-leaning
Ariel
ARGFX
produced equally big returns. Small-
cap value-priced tech names, cyclical stocks, and
industrials helped these funds to brilliant results. Just
as we haven’t downgraded many conservative funds
for lagging, not many of these funds have been
upgraded for rallying.
Gold-rated
Fidelity Small Cap Discovery
FSCRX
is another value-leaning blend fund that continues
to thrive. Chuck Myers employs a Buffett-influenced
approach to value that’s been quite effective.
We’re not ignoring returns, though.
T. Rowe Price
Value
TRVLX
manager Mark Finn continues to
impress with excellent results since he took over in
2009
, and we recently upgraded the fund to Bronze.
The key link in all those ratings is that we look at a
manager’s full body of work, whether that’s four
years or
40
. Letting recent performance influence
you too much can be costly.
The Script Flips
In fact, if you go back to
2009
, you’ll see what I’m
talking about. American Century Equity Income,
Amana Income, and First Eagle
US
Value were all
5
stars then. Ariel was just
2
stars. Fidelity Small Cap
Discovery and T. Rowe Price New Horizons were
3
,
and they are
5
now. Bogle Small Cap Growth was
1
star. Royce Opportunity was
2
stars.
Or, to put it another way: The investment world
moves in cycles, and it’s when those cycles
have a long run that shorter-term performance
can deceive us the most.
œ
We mapped the returns of the
U.S. stock funds in the M500. As
you can see, place in the style
box was no guarantee of strong
or weak returns, but many of
the weakest returns were near
the top and many of the best
were near the bottom, indicating
that small caps fared better than
large. You also see a modest
growth bias in large caps as the
deep-value large-cap funds in
the upper left-hand corner are
almost all blue.
Valuation
Market Capitalization
Value
Blend
Growth
Small
Mid
Large
Highest 5-
Y
r Returns
Lowest 5-
Y
r Returns
Mapping the
M
500 Returns
Continued on Page 4
