18
We’ve lowered our Morningstar Analyst Rating on
T. Rowe Price Health Sciences
PRHSX
to Neutral
from Gold. You don’t often see a change that
dramatic, but it’s warranted here.
Kris Jenner, who ran the fund since January
2000
, is
leaving and taking two analysts with him. Jenner
produced outstanding returns with savvy investments
in biotech and other small health-care companies.
Jenner’s successor is Taymour Tamaddon, who has
served as an analyst for the fund since
2004
but has
no prior management experience. Tamaddon has
covered stocks in the ophthalmology, life sciences,
and hospital supply industries.
The departure of two analysts adds to the pain here.
Along with Jenner, they were responsible for
coverage of
40%
of the fund’s holdings. Thus, you go
from a fund with one of the best and most experi-
enced teams to one with an inexperienced manager
and some holes in coverage.
Artio, Too
We have also lowered the ratings of
Artio Interna-
tional Equity II
JETAX
and
Artio International
Equity
BJBIX
to Neutral from Bronze in light of a
planned management change.
Artio Global has agreed to be acquired by Aberdeen
Asset Management
PLC
. The two firms have been
going in opposite directions. Aberdeen has grown
rapidly, and its emerging-markets strategy is one of
the biggest in the world. Meantime, poor perform-
ance and big outflows have led to staff cuts at Artio.
Aberdeen has said it will retain the Artio bond team
that runs Bronze-rated
Artio Global High Income
BJBHX
. However, Richard Pell and Rudolph-Riad
Younes are not expected to join Aberdeen when the
deal is complete. The pair manages Artio Interna-
tional Equity and Artio International Equity
II
. Those
funds had a long record of success but have been
poor performers in recent years.
We are now looking at quite a bit of uncertainty. The
deal will likely go through, and it’s expected to win
shareholder approval by midyear, but there’s no guar-
antee. In addition, Aberdeen has not said who
will take over the funds after the deal goes through.
It seems likely the two Artio funds will be run in a
different fashion after the merger, as few other
managers employ Pell and Younes’ particular brand of
top-down and bottom-up strategies.
However, there may well be an upside to the change.
Aberdeen is a deeper organization that’s growing
rather than shrinking. Aberdeen has some good track
records in foreign funds. For example,
Aberdeen
International Equity
GIGAX
is a
4
-star foreign large-
blend fund. I’ll keep you posted as we learn more
about its direction.
A Modest Upgrade
Meanwhile, at a fund where there hasn’t been any
drama, we’ve raised
Fidelity Growth & Income
FGRIX
to Bronze from Neutral. Manager Matt Fruhan
is a rising star at Fidelity who is worth watching.
We already had a Bronze rating on his
Fidelity Large
Cap Stock
FLCSX
, where he’s produced strong
results since
2005
. However, we waited a bit at
Growth
&
Income to see how he adapted his strategy
at Large Cap Stock to Growth
&
Income.
We’ve seen enough now to raise Growth
&
Income’s
rating. The strategies are essentially similar except
that Fruhan aims to meet or beat the S
&
P
500
’s yield
at Growth
&
Income. Fruhan likes to catch good
companies where share prices have declined because
of short-term setbacks. His move into housing stocks
in
2011
is an example, as are positions in some of the
money center banks like
J.P. Morgan Chase
JPM
and
Wells Fargo
WFC
. The two funds have a com-
bined $
7
.
4
billion in assets, which is not so big that it
would worry us in a large-cap strategy.
œ
A Big Downgrade for a T. Rowe
Price Fund
Tracking Morningstar Analyst Ratings
|
Russel Kinnel
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.
