You can set the bar really high these days. Even if
you demand a lot, you can still find quite a few funds
that pass all hurdles.
Last year I shared the ”Fantastic
46
” with you. This
year I raised the bar on my tests and still reached
51
funds. Here’s what I want: a fund with expenses
in the cheapest quintile, returns that beat the bench-
mark over the course of the manager’s tenure
(minimum five years), manager investment of at least
$
500
,
000
, a positive Parent rating, and a medalist
Morningstar Analyst Rating. Last year I only wanted
a Parent rating of Neutral or better and I didn’t
include an Analyst Rating test.
I also excluded true institutional funds. Those are
funds where only institutions were able to get in over
the history of the share classes. Some funds are
labeled institutional but actually have a fairly low
minimum investment available to individual investors.
I included them as well as share classes that were
once open to individual investors but closed to all but
institutions when the fund company converted to load.
I included them because many of you have some of
those legacy share classes. Finally, I allowed
PIMCO
Total Return Institutional
PTTRX
in the list because
so many investors have access to it through
401
(k)s.
One final note on the list: Because I screened out
funds that lagged their indexes, no passively
managed funds made the list. Thus, this is a great list
of actively managed funds. That’s not to suggest that
index funds are not a good option. We have quite a
few passive funds rated Gold that I consider excellent
investments, such as
Vanguard Total International
Stock Index
VITAX
and
DFA U.S. Micro Cap
DFSCX
.
Let’s take a look at some of the funds that made the
Fantastic
51
.
American Funds to Start
Ten funds from American made the list. They have low
costs, experienced managers, high levels of manager
investment, and strong long-term performance. For
example,
Fundamental Investors
’
ANCFX
longest-
tenured manager has been there since
1984
, and over
that time the fund has returned
11
.
9%
annualized
versus
10
.
8%
for the S
&
P
500
. Management looks for
dominant global players that pay a respectable divi-
dend. The fund has produced top-decile returns over
the past
10
and
15
years. That’s a long record of
sustained outperformance. One year’s returns won’t
wow you, but it adds up over time.
Berwyn Income
BERIX
is well-suited to the conser-
vative-allocation category. The fund takes a cautious
avenue to income by investing in dividend-paying
stocks, corporate bonds, preferreds, convertibles,
Treasuries, and cash. The fund lost just
10
.
1%
in
2008
yet has still performed well in the ensuing rally.
With an expense ratio of just
0
.
64%
, most of the
fund’s income flows through to shareholders.
Dodge & Cox Income
DODIX
and
Dodge & Cox
International Stock
DODFX
make the list because
they’ve done an outstanding job at a low price. Both
are fairly diversified but win out over the long haul
through good stock and bond selection. Like American,
Continued on Page 3
The Fantastic 51
Fund Reports
4
Clipper
Fairholme
FMI Large Cap
Vanguard Capital Opportunity
Morningstar Research
8
The Best and Worst Fund
Companies
The Contrarian
10
Falling Fees at Good Funds
Red Flags
11
These Dogs Won’t Hunt
Market Overview
12
Leaders & Laggards
13
Manager Changes and News
14
Portfolio Matters
16
Two Experts Share Their
Income Strategies
Tracking Morningstar
18
Analyst Ratings
Income Strategist
20
FundInvestor 500
22
FundInvestor 500 Spotlight
23
Follow Russ on Twitter
@RussKinnel
RusselKinnel,
Director of FundResearch and Editor
FundInvestor
May 2013
Vol. 21 No. 9
Research and recommendatio s for the s riou fund investo
SM
