293 / 772
3
Morningstar FundInvestor
July
2015
General Electric
GE
. That has brought volatility
down sharply and made the fund into just what
you’d expect from the name. It’s promising but still
in early days.
A Trend Among the Top 20
It’s interesting that seven of the
20
funds with the
biggest declines in volatility hail from Fidelity.
Fidelity Value
FDVLX
,
Fidelity Overseas
FOSFX
,
Fidelity Independence
FDFFX
, and
Fidelity
Select Energy
FSENX
made the list, too. The firm is
trying to become more risk-aware and make the
strategies fit the names better. In the past, Fidelity
has given back all of its outperformance in down-
turns. These changes indicate these funds may be
able to hold up better in the next bear market.
Risk On
Most of the funds with rising standard deviation
made the list simply because their asset class
became more volatile. The volatility in precious
metals, utilities, Treasury Inflation-Protected
Securities, and
GNMA
s meant
Oppenheimer Gold
& Special Minerals
OPGSX
,
Franklin Utilities
FKUTX
,
PIMCO Real Return
PRRDX
, and
T. Rowe
Price GNMA
PRGMX
saw their standard deviations
rise. However, these were all results of market
factors rather than changes in portfolios or strategies.
So, I’ll select some from the list of highest standard
deviations in the diversified U.S. equity and foreign-
equity Morningstar Categories. Although their
standard deviations fell, they still pack quite a punch.
Scotia Dynamic U.S. Growth
DWUGX
17.15 (
from
20
.
17
)
This is a throwback fund investing in the fastest-
growing companies with little regard for valuation.
It’s been in the top or bottom decile of its peer
group in four of the past five years and is in the top
decile so far in
2015
. Many of its fast-growers
are small- to mid-cap names such as
Tableau Soft-
ware
DATA
and
ServiceNow
NOW
, but it still
has
7%
of assets in both of those names. In sum, this
fund is high risk, so don’t put a big piece of your
portfolio in it.
Fairholme
FAIRX
15.96
(from
23
.
24
)
Bruce Berkowitz has shown just how much a focused
portfolio can lead to a dramatically different risk/
reward profile. The fund once had a big cash stake
and a more moderate equity portfolio. Today, the
fund has
35%
of assets in
AIG
AIG
,
17%
in
Bank of
America
BAC
, and even
9%
in
Sears
SHLD
, which
has all the look of a value trap. Cash has ticked up
to
13%
, but it is well below past highs and certainly
not enough to meaningfully damp the volatility of
such a bold equity portfolio. It’s still a good fund but
only if you are very patient and mindful of your
weighting in it.
CGM Focus
CGMFX
15.71
(from
26
.
31
)
Ken Heebner has long made this a superaggressive
fund. Not only is it focused, but Heebner also
makes rapid sector shifts and will short stocks, too.
With a
266%
turnover rate, this fund is in fact
a very different proposition than Fairholme. We rate
it
ˇ
because we haven’t seen a clear succes-
sion plan among other things.
K
The 20 Biggest Drops in Standard Deviation
Name
Ticker
Std Dev 3-Yr
05/2015
Beta 3-Yr
05/2015
Std Dev 3-Yr
05/2012
Beta 3-Yr
05/2012
Change
Std Dev
Change
in Beta
Fidelity Small Cap Stock
FSLCX
10.84
1.06
25.35 1.48 -14.51 -0.42
Fidelity Leveraged Company Stock FLVCX
9.95
1.00
24.22 1.44 -14.27 -0.43
Royce Opportunity
RYPNX 13.57
1.27
27.42 1.58 -13.84 -0.31
Ariel Fund
ARGFX
12.68
1.27
26.24 1.56 -13.56 -0.29
Third Avenue Value
TAVFX
8.91
0.74
22.02 1.01 -13.11 -0.27
Dreyfus Opportunistic Small Cap DSCVX 14.77
1.32
27.65 1.58 -12.89 -0.25
Fidelity Dividend Growth
FDGFX
8.62
1.00
21.45 1.31 -12.83 -0.31
Fidelity Overseas
FOSFX
9.98
0.88
22.78 1.10 -12.80 -0.22
Vanguard Capital Value
VCVLX
11.42
1.12
24.09 1.46 -12.68 -0.34
Columbia Acorn Select
ACTWX 10.17
0.95
22.69 1.33 -12.52 -0.39
T. Rowe Price New Era
PRNEX
12.85
1.07
25.31 1.27 -12.46 -0.20
Causeway Intl Value
CIVVX
10.48
0.92
22.76 1.10 -12.28 -0.18
Fidelity Value
FDVLX
9.25
0.99
21.51 1.30 -12.26 -0.30
Fidelity Independence
FDFFX
11.27
1.00
23.39 1.38 -12.12 -0.39
Ariel Appreciation
CAAPX 11.85
1.25
23.92 1.44 -12.08 -0.19
Fidelity Select Energy Portfolio
FSENX
15.46
1.18
27.47 1.31 -12.01 -0.14
Artisan International
ARTIX
10.00
0.83
21.83 1.04 -11.83 -0.22
Harbor International
HAINX
10.71
0.96
22.48 1.10 -11.76 -0.14
Royce Low Priced Stock
RYLPX
12.49
1.05
24.13 1.37 -11.64 -0.31
Third Avenue Real Estate Val
TAREX
7.78
0.69
19.40 1.02 -11.62 -0.32
Data as of May 31, 2015.