531 / 772
Every active manager is different. The labels we put
on them might make them look the same, but they
aren’t. To make the most of them, you need to under-
stand a fund’s strategy. So, I thought I’d bring some
pictures to help you understand how a
manager invests.
We mapped every buy and sell that eight prominent
stock funds made in their most recent reporting
periods. Seeing every holding mapped is helpful, but
just as useful is seeing what a stock looks like
when it is appealing enough to be purchased and
when it is unappealing enough to be sold. As you
can see from the graphs, all of these managers have
distinctly different styles.
The Morningstar Style Box is built using value and
growth measures for the x-axis score and market
cap for the y-axis score. High valuations and high
growth rates push a stock to the far-right side;
a utilities stock with low valuations and low growth
would be far to the left. It’s not a perfect system,
and it might not capture precisely what a manager
does, but it does give you some sense of what’s
driving a manager’s strategy.
I often find that sell decisions are the best way to
separate managers. A value manager who lets
her winners ride is very different from one who sells
as soon as the stock’s price multiples match those
of the S
&
P. Or you can reverse and say a growth
manager who sells at the first hint of bad news is very
different from one who rides it out.
Typically a manager will have a few reasons for
selling, but the main reasons are success or failure. If
it’s success, the manager is likely selling because
the market has come around to his way of thinking
and has placed a higher valuation on a company.
These would be sales that tilt toward the upper-right
side of the style box. For failures, you may have
declining price multiples and declining market cap.
These are usually the sales to the lower left of the
rest of the style box.
Let’s take a look at some trades from well-known funds.
Oakmark Select OAKLX: Paying a fair price for a
great business.
Let’s start with the fund that made the fewest trades.
Bill Nygren is a low-turnover-focused portfolio
Every Picture Tells an
Investment Story
Fund Reports
5
Champlain Mid Cap
Fairholme Focused Income
T. Rowe Price Dividend Growth
Morningstar Research
8
How to Beat an Efficient Market
The Contrarian
10
Is It Safe to Invest All Your Money
With One Fund Company?
Red Flags
11
Rising Concentration Points to
New Risks
Market Overview
12
Leaders & Laggards
13
Manager Changes and News
14
Portfolio Matters
16
5 Year-End Portfolio Mistakes
to Avoid
Tracking Morningstar
18
Analyst Ratings
Income Strategist
20
Vanguard Rolls Out Muni
Index Funds
Changes to the 500
22
FundInvestor 500 Spotlight
23
Follow Russ on Twitter
@RussKinnel
RusselKinnel, Director of
ManagerResearch and Editor
FundInvestor
December 2015
Vol. 24 No. 4
Research and recommendatio s for the s riou fund investo
SM
Continued on Page 2
Valuation
Value
Blend
Growth
Market Capitalization
Small
Mid
Large
1
Buys
1
Sells
Oakmark
Select OAKLX