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I am adding two foreign funds and one domestic to
the Morningstar
500
.
American Century International Growth
TWIEX
has
done a fine job applying the firm’s core growth strategy
overseas. Management screens for companies with
accelerating earnings and then does fundamental
analysis to unearth sustainable growth models.
When it finds both, it invests. The combination of
momentum and sustainable growth leads to fairly
high turnover, in the
100%
range most years.
Rajesh Gandhi has comanaged the fund since February
2008
, and he was joined by James Gendelman in
February
2015
. Gandhi has outperformed peers and
benchmark by modest margins over his tenure. Some
good pharmaceutical picks powered returns in
2012
and
2013
, but performance has been middling since.
Gendelman ran some of Marsico’s foreign-equity
funds before joining American Century. In nearly
14
years at Marsico, Gendelman guided
Marsico
International Opportunities
MIOFX
to performance
that beat peers and benchmark. However, most
of that outperformance came in the early years, and
the fund was in a slump when he left. See the
facing page for more details.
I’m also adding
Fidelity International Growth
FIGFX
,
which we began with a Morningstar Analyst Rating
of Bronze.
Manager Jed Weiss focuses on companies with multi-
year structural growth potential in industries with
high barriers to entry. He also looks for out-of-favor
cyclical plays with pricing power, or companies that
can keep prices steady or even raise them in bad
economic times. While his process focuses on stock-
picking, he will use macroeconomic-driven market
shocks to spot price dislocations that can lead to good
buying opportunities, such as Japan's Fukushima
earthquake in
2011
or heightening tensions in Russia.
I'm also adding
DFA US Small Cap Value
DFSVX
.
The Gold-rated fund targets the cheapest
35%
of the
U.S. small-cap market based on price/book. The
fund's
0
.
52%
expense ratio makes it pricier than some
passive small-cap funds, but
DFA
's trading strategy
has generally been able to make up that ground.
To make room, I’m dropping Neutral-rated
Mainstay
ICAP International
ICEUX
. We lowered the fund
to Neutral when manager Jerry Senser announced
he would retire in September
2016
.
I’m also dropping the Neutral-rated
Thornburg Inter-
national Value
TGVAX
. The fund is in the process
of losing two thirds of its management team. Wendy
Trevisani left in
2014
, and Bill Fries is set to leave at
the end of
2016
.
Finally, I’m dropping
CGM Focus
CGMFX
. The
Neutral-rated fund has suffered a dismal performance
slump. In addition, manager Ken Heebner is
72
but does not appear to have a clear replacement.
K
What is Morningstar
FundInvestor
500
?
The Morningstar FundInvestor
500
features the industry’s
best and most notable funds.
Use the list to get new in-
vestment ideas and track the
funds you already own.
FundInvestor
subscribers have
access to one-page monthly
reports on all 500 funds on
mfi.morningstar.com. Just
type in the name or ticker of
the fund in the search box.
New Additions From Fidelity and
American Century
Changes to the 500
|
Russel Kinnel
Summary of Changes
Add
Drop
American Century International Gr
CGM Focus
Columbia Dividend Income A
Columbia Dividend Income Z
DFA US Small Cap Value
Mainstay ICAP Intl
Fidelity International Growth
Thornburg International Value
Rating Change (Upgrade)
From
To
Janus Triton
‰ ´
Janus Venture
‰ ´
Neuberger Berman International Eq
´ •
Rating Change (Downgrades)
From
To
Fidelity Capital Appreciation
´ ‰
T. Rowe Price Small-Cap Stock
• ‰
Summary of Changes
Category Changes
From
To
American Funds Income Fund of Amer Moderate Allocation
Allocation—70% to 85% Equity
Franklin Mutual Shares
Large Value
Allocation—85%+ Equity
Vanguard LifeStrategy Income
Conservative Allocation Allocation—15% to 30% Equity
PIMCO Emerging Local Bond
Emerging Markets Bond Emerging-Mrkts Local-Currency Bnd
Gateway
Long/Short Equity
Option Writing
Fidelity Strategic Real Return
Conservative Allocation Allocation—15% to 30% Equity
Vanguard Managed Payout
Aggressive Allocation
Allocation—85%+ Equity