356 / 772
18
Some say mid-caps are the sweet spot of the stock
market. (Especially if they happen to be marketing
mid-cap funds.) They say that you have more profes-
sional management and less volatility than small
caps yet greater room to grow than large caps.There’s
some truth in that, and mid-caps currently have
slightly better
10
-year returns than large and small.
It’s something of a sweet spot for mutual funds,
too, as you’ll find some outstanding managers there.
Let’s take a look at how a few of our top-rated
actively managed mid-blend funds have fared of late.
Some are closed to new investors. Don’t forget about
great passive options like
Vanguard Mid Cap
VIMAX
and
Vanguard Extended Market Index
VEXAX
.
Longleaf Partners Small-Cap
LLSCX
Top 20%
trailing five years
How does a fund named “small cap” end up in the
mid-cap Morningstar Category? This fund buys small-
cap stocks but allows them to grow into mid-caps
(provided they pick the right stocks, of course). This
closed fund has a Morningstar Analyst Rating of Gold
and has been the jewel in Longleaf’s crown, as it has
had an array of quirky winners from
Level 3 Commu-
nications
LVLT
to
Vail Resorts
MTN
.
Ariel Fund
ARGFX
Top 20%
trailing five years
This Bronze-rated fund was clobbered in
2008
but
came back strong in the ensuing years. It is on pace
to record its sixth top-quartile calendar-year perform-
ance in the past seven. It hasn’t changed much since
2008
, except to drill deeper on a company’s debt
burden, but the market decided it liked some of its
dull but steady names after all.
Jones Lang LaSalle
JLL
,
Newell Rubbermaid
NWL
,
Mohawk Indus-
tries
MHK
, and
CBRE Group
CBG
have been in the
fund since before
2008
and have each produced more
than
20%
annualized returns over the past five years.
First Eagle Fund of America
FEAFX
Top 27%
trailing five years
This Silver-rated fund has handled a generational shift
pretty smoothly. David Cohen has dialed down his
contributions here, while Eric Stone has ramped up
since being named manager in
2013
. Harold Levy
remains at the fund, as he has since its
1987
incep-
tion. The fund seeks corporate changes that will
drive stock prices higher and has found winners in the
likes of
Seagate Technology
STX
,
Wyndham
Worldwide
WYN
, and
Sealed Air
SEE
. The fund’s A
shares (
FEFAX
) are open. The Y shares are not.
Aston/Fairpointe Mid Cap
CHTTX
Top 51%
, trailing five years
This closed Silver-rated fund has posted a middling
five-year return. Favoring tech and basic materials
over health care explains the sluggish results. Thyra
Zerhusen and team look for niche businesses with
growing market share and little debt. Biotech stocks
rarely meet their criteria, which explains the small
stake in health-care stocks. But the strategy has been
a winning formula over the long haul; the fund’s in the
top
2%
of mid-blend funds for the trailing
10
years.
Vanguard Capital Value
VCVLX
Top 66%
trailing five years
This fund had been doing better than average, but
the slump in energy really hurt—the fund has
18%
of
assets in energy versus
6%
for the category. The
fund plies a very aggressive kind of value investing
thanks to Peter Higgins, who runs his half of the
portfolio independently from David Palmer of Welling-
ton Management and is a deep-value investor. Palmer
is a less-daring classic-value investor, but that still
doesn’t make this a tame fund.
FMI Common Stock
FMIMX
Top 68%
trailing five years
This closed, Gold-rated fund has a weak five-year
number and a great
10
-year mark. It has a focused
portfolio that makes for a bumpy ride. Cyclical stocks
like
Compass Minerals International
CMP
and
Armstrong World Industries
AWI
have held it back.
Pat English and team look for solid management
at companies with low valuations. That has worked
nicely over the long haul but has not clicked of late.
K
In the Market’s Sweet Spot ... Maybe
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.