3
Morningstar FundInvestor
October
2013
A Fidelity-Heavy Portfolio
You can build a complete portfolio at Fidelity, but it’s
not quite ideal. Fidelity has some strong equity funds
but it also has a lot of mediocre ones. Moreover,
Fidelity’s stock funds tend to run with the pedal to the
metal so that you make a robust return in rallies but
often get smacked in sell-offs. Let’s consider some
more-cautious funds and some focused ones, too, as
Fidelity tends to run huge portfolios.
FPA Crescent
FPACX
is the sort of fund you won’t
find at Fidelity. It’s cautious, focused, and even
has a smattering of short positions. Steve Romick is
a long-tenured manager who figures to stick around—
another welcome contrast with Fidelity.
Tweedy, Browne Global Value
TBGVX
is not par-
ticularly focused, but it is a solid value fund with
a decent amount of smaller-cap stocks that should
make for a nice diversifier. Fidelity still has a little
work to do on its foreign-equity side.
Longleaf Partners
LLPFX
is a cautious focused
fund worth a look. Yes, it has been through a slump
and had some well-publicized spats with share-
holdings at
Dell
DELL
and
Chesapeake
CHK
, but
the long-term record is strong and the culture is
shareholder-friendly.
Oakmark Select
OAKLX
is another appealing
focused fund. Bill Nygren has proved adept at finding
great long-term investments. Sometimes, he buys a
little early, but usually he comes out ahead in the end.
Fidelity has closed its best small-cap funds, so
FMI
Focus
FMIOX
is worth a look. Rick Lane and his team
have built a great long-term record by looking for
well-managed companies with good market positions
but whose shares are trading at sizable discounts
to private market values. As with most focused funds,
returns can be pretty lumpy.
A T. Rowe Price-Heavy Portfolio
T. Rowe Price is a place I would be pretty comfortable
building a complete portfolio. In fact, the two earn
our top target-date ratings in part because their depth
and consistency are tough to beat.
T. Rowe lacks good index funds, however. Naturally
Vanguard Total Stock Market Index
VTSAX
and
Vanguard Tax-Managed International
VTMGX
are great ways to lower your costs and cover the
whole market.
T. Rowe also has a shortage of great foreign funds.
I like
Causeway International Value
CIVVX
, which
is an outstanding pure developed-markets invest-
ment with seasoned managers.
Artisan Global Value
ARTGX
is a nice focused foreign fund that would
appeal in a lineup of more-cautious, diffuse T. Rowe
funds. I also like
Dodge & Cox Global Stock
DODWX
as a dependable low-cost actively managed
option that you can buy and hold for a long time.
If you’d like an active asset allocator, Rob Arnott’s
PIMCO All Asset
PASDX
is a real standout. It’s
down this year, but the long-term record gives reason
to keep the faith.
A Vanguard-Heavy Portfolio
Vanguard is great, but sometimes its actively man-
aged funds get watered down by too many managers.
The focused funds previously mentioned have natural
appeal. If you have a couple of broad index funds,
then focused funds don’t entail as much risk as long
as you don’t make them huge positions.
Sequoia
SEQUX
has the brilliant low costs and long-term focus
you get at Vanguard, but it still has a nice small
asset base and brilliant management.
Akre Focus
AKREX
is a nice mix of caution and
aggression as Chuck Akre is a brilliant growth stock
investor who will let cash build when the market
isn’t offering good bargains. Unfortunately, he isn’t
Vanguarding when it comes to costs.
Vanguard’s bond funds tend to go straight down the
middle, and that’s great, but it means the taxable ones
are mostly government-heavy and have interest-rate
risk.
PIMCO Investment Grade Corporate Bond
PIGIX
is a great way to escape government debt. If you
want to get even bolder,
PIMCO Unconstrained
Bond
PUBDX
has greater flexibility to shelter inves-
tors from interest-rate risk and makes a welcome
diversifier for a portfolio with bond index funds.
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