18
For a fund to earn a Morningstar Analyst Rating of
Gold, it must be a true standout with competitive
advantages. Not every category has one—in some
categories the top-rated fund is Bronze or Silver.
In such a case, you could either take the best of the
group or look for another way to gain exposure
to the category.
For example, the top Japan fund is only rated Bronze,
but you could instead consider a broad foreign fund or
a diversified Pacific fund as a way to get Japanese
exposure. Let’s look at the top-rated funds in catego-
ries devoid of Gold-rated funds.
Matthews Japan Investor
MJFOX
is rated Bronze
as it has good management and a sound approach.
However, expenses are only average and Matthews
has done better in other parts of Asia. Another
option would be to choose Gold-rated funds such as
Oakmark Global
OAKGX
, which has
22%
of
assets in Japan, or
Vanguard Developed Markets
Index
VDMIX
, which has
21%
of assets in Japan.
AllianzGI Technology Institutional
DRGTX
is rated
Silver. It’s a fine pure play on tech. However, that
applies to the Institutional shares. The Retail shares
charge a rather high
1
.
58%
expense ratio, so you
might want something cheaper. Moreover, tech is in
the wheelhouse of many a growth manager. For
small-cap tech,
Brown Capital Management Small
Company
BCSIX
uses an outstanding, patient
approach. For mid- or large-cap tech, Primecap’s funds
have a more modest
25%
–
35%
in tech.
Primecap
Odyssey Aggressive Growth
POAGX
is a brilliant
mid-cap play, and
Vanguard Capital Opportunity
VHCOX
is a much cheaper way to get tech exposure
along with health care.
Silver-rated
RS Global Natural Resources
RSNRX
is our top-rated natural-resources fund. It’s the fund’s
strategy that really sticks out. Instead of trying to
predict commodity prices, management looks for low-
cost producers in industries with steep supply cost
curves. The result is a portfolio less exposed to big
swings in commodity prices. However, the fund does
come with a front load.
Natural-resources funds typically include energy,
mining, and other commodities, so we can seek out
alternatives in those areas. This time we’re getting
more narrow instead of more broad. One possible sub-
stitute is
Vanguard Precious Metals and Mining
VGPMX
, which is a cheap no-load fund with one foot
in precious metals and one foot in natural resources.
However, it doesn’t have energy in its mandate. If
that’s what you want, then
Vanguard Energy
VGENX
,
run by Wellington’s Karl Bandtel, is worth a look.
The fund takes a straightforward approach to finding
attractive giants in the energy world. With names
like
Exxon Mobil
XOM
,
Chevron
CVX
, and
Shell
RDS
.A at the top of the portfolio, you know what
you’re getting, and over time this fund has done well.
Vanguard Long-Term Treasury
VUSTX
is a Silver-
rated fund that does a fine job with its mission. But
with rates at record lows, this fund is pretty vulner-
able to an interest-rate spike. Better to be more
diversified by bond type and duration. I’d rather own
Gold-rated
Vanguard Total Bond Market
VBTLX
.
The fund owns Treasuries of all maturities as well as
mortgages and a slug of high-quality corporates.
Not only that, but it charges an expense ratio that’s
half the levy charged by Vanguard Long-Term
Treasury. With yields this low, even
10
basis points
is welcome.
œ
Categories With No Gold-Rated Funds
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.
