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You don’t often have a bad experience when you
invest with a firm that gets an A for its Morningstar
Stewardship Grade. To get an A, a firm must have
a strong culture and a history of doing the right thing
for investors. To illustrate, I’ve selected six funds
from A stewards from different categories. Each has
low costs, a sound strategy, solid performance,
and very stable management. If you have all of those
things, you’ve got a pretty good chance at success.
American Funds New Perspective
ANWPX
American Funds has proved quite adept at investing
overseas, and this world-stock fund shows why.
The firm has long had one of the largest global equity
analyst staffs, and that’s important when you are
managing a
$59
billion fund like this one. But more
important than quantity is quality. The analysts are
seasoned and skilled, as are the portfolio managers. A
modest
0
.
75%
expense ratio helps those picks to
shine through for this fund, which has a Morningstar
Analyst Rating of Gold. Its trailing returns are top-
quartile for the three-, five-,
10
-, and
15
-year periods.
Dodge & Cox Income
DODIX
A chunk of the money fleeing
PIMCO Total Return
PTTRX
after Bill Gross’ departure wound up at this
fund. It’s easy to see why as Dodge has one of the
most stable manager and analyst staffs around,
and thus may be a welcome option for those fatigued
with corporate intrigue. The fund is also a more
straightforward vehicle than
PIMCO
Total Return. While
the latter is largely a collection of macro bets made
with derivatives and a side of issue selection, Dodge
&
Cox Income is primarily driven by issue selection,
and it doesn’t bother with derivatives. The fund mostly
owns corporate bonds and mortgages. No big bets
on currencies will be found here. Its long-term trailing
returns are all in the top third of its peer group.
T. Rowe Price Dividend Growth
PRDGX
This Silver-rated fund has long plied a dividend-growth
strategy, yet it has a modest
$5
.
5
billion under
management. Tom Huber has done a fine job since he
took over in
2000
. He looks for firms with strong
balance sheets and robust cash flow. His wariness of
energy and other commodity producers has made
for a smoother ride. It resides in the top decile of its
peer group over all the long-term trailing periods.
T. Rowe Price QM U.S. Small-Cap Growth
Equity
PRDSX
T. Rowe Price isn’t known as a quantitative shop, but
lo and behold, this fund has done quite nicely with
a diffuse quant strategy. Sudhir Nanda turned this fund
into a champ when he took over in
2006
. It combines
models that focus on valuation, earnings quality, and
balance sheets. Nanda and team continue to test
for ways to improve the models. The fund’s
10
-year
returns are in the top decile of its Morningstar Category.
Vanguard Developed Markets Index
VTMGX
This is an outstanding core holding, and it will only
cost you
9
basis points. Many funds charge more for
investing your money overseas, but this fund shows
you don’t have to go that route. Like a good steward,
Vanguard continues to research the science of
indexing, and it regularly upgrades its funds’ bench-
marks when possible. This fund recently moved
from the
FTSE
Developed ex-North America Index to
the
FTSE
Developed All Cap ex-
US
Index. It’s a
minor change that adds Canadian stocks and some
small-cap stocks, but it shows that Vanguard is still
working to improve results.
Vanguard High-Yield Tax-Exempt
VWAHX
This Silver-rated fund gives you a little more yield for
a little more credit risk. It’s well designed, as Vanguard
was wary of taking on as much risk as most high-
yield muni funds. Results have been solid, though they
are not quite as good as they seem versus the
muni-national intermediate peer group, which is even
higher-quality. The Vanguard fund is on the border
between that group and muni high yield, but it looks
fine either way.
K
Top Picks From Top Stewards
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.