18
Morningstar Analyst Ratings
take the long view. We’re
looking at a fund’s long-term prospects for risk-
adjusted returns that are better than their category
and benchmark. When performance is extreme,
however, fear and greed can overwhelm investors.
With that in mind, I thought I’d take a look at some of
the highest and lowest year-to-date returns in the
Morningstar
500
.
Bottom Three
Precious metals and emerging markets have been
about the worst performers for the year. In particular,
gold and India have really gotten hammered. In both
cases, it’s due in part to signs that the Fed will taper
off its bond purchases, making for a stronger dollar
and higher interest rates. The two funds with the big-
gest losses were precious-metals funds followed
by an India fund. Although their categories have been
awful, the bottom three funds have actually had
respectable performance relative to their peers. Two
have outperformed, and one is only a bit behind
the average.
Our biggest loser is
Oppenheimer Gold & Special
Minerals
OPGSX
, which is down a nasty
41
.
1%
for
the year to date. We rate it Silver because of its deft
management among big and small miners. However,
it’s aggressive enough that it tends to outperform in
rallies and get punished in down markets. Thus, its per-
formance is not out of character this year, and we
still have faith.
Vanguard Precious Metals and Mining
VGPMX
follows a more diffuse strategy that gets it well
beyond precious metals. Thus, its
32
.
9%
loss actually
tops its category. This makes it a more broad infla-
tion hedge than most of the competition, but it also
means it’s not going to make you a mint when gold
rallies. The fund invests in other commodity producers,
including diamond, potash, and copper miners. That
added level of diversification moderates the extremes
of dedicated gold funds, although obviously it still
can get hit. All that and the fund’s low costs earn it
a Gold rating.
Matthews India
MINDX
is down
15%
this year;
that’s better than the typical India fund. We’re big
fans of Matthews because of its skill and depth
at covering Asia. Thus, the fund is rated Silver. That
said, India is going through a difficult time as struc-
tural flaws have hammered the economy and the
markets. India has a new central bank chief who hopes
to restore confidence, but it looks like a tough job.
Top Three
We rate
Primecap Odyssey Aggressive Growth
POAGX
Gold because it boasts an excellent team of
growth investors, a good strategy, and low costs. This
year a number of health-care and biotech stocks have
been a boon. While this is a great long-term holding,
be ready for some rough patches. This year it is up
44
.
8
%
—topping all of its peers. However, the last time
it topped its peers was
2006
, and the following year
it lagged by a massive
1
,
500
basis points. As with the
other two funds on this list, a sell-off in health-care
names would really sting.
T. Rowe Price Health Sciences
PRHSX
is having
a great year, but we rate the fund Neutral because
manager Kris Jenner bolted and took two analysts
with him. That was a real setback for the fund, and it
makes me wary of this fund’s prospects.
Fidelity Select Health Care
FSPHX
is up
38
.
1%
,
topping most of its health-care peers. We tend to
rate Fidelity Select funds either Neutral or Bronze
because they are cheap and have some good analyst
support but suffer from too much manager turnover.
Ed Yoon has been on the fund since
2008
, and his
tenure and strong record over five years tips this fund
into Bronze. Fidelity’s sector fund managers can stay
at their funds rather than become managers of big di-
versified funds. Yoon’s tenure suggests he wants
to make a career out of it, so we rate it Bronze.
œ
Looking at This Year’s Notable
Performers
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.
