6 / 708
4
A notch higher in yield but lower in credit quality are
Fidelity High Income
SPHIX
and
T. Rowe Price
High Yield
PRHYX
. Both are well-run funds with
seasoned portfolio managers.
At Fidelity High Income, Fred Hoff has built a strong
record since
2000
that covers two major credit melt-
downs. He had light exposure to automakers in
2007
and more recently has had limited energy exposure.
He has occasionally built cash for defensive purposes,
though it was only
3%
at the end of October
2015
.
Mark Vaselkiv has run T. Rowe Price High Yield since
1996
, and he’s done a fine job of diving into good
value plays at the right time. For example, he added
financials after the
2008
crisis. He has beaten
peers and the benchmark over the trailing
10
years
and since he took over in
1996
.
Emerging Markets
What’s wrong with emerging markets? The short
answer is China. China’s growth slowed faster
than most expected. That pulled the rug out from
under commodity prices. That was bad news for
China and many other emerging-markets commodities
producers. But Brazil had its own turmoil beyond
falling commodity prices, and quite a few emerging
markets look fragile today.
Emerging markets have been getting cheaper and
cheaper, but now it takes a little nerve to get in
because so many are under the gun. But it might be
worth it.
GMO
’s current seven-year forecast is for
negative returns in stocks and bonds across the globe
except for emerging-markets stocks and bonds,
which are forecast to have returns of
4
.
1%
and
2
.
2%
annualized, respectively. If it is right, then there will
also be a big cost to being out of emerging markets.
Harding Loevner Emerging Markets
HLEMX
This fund is a nice steady performer. It has outper-
formed in six of the past seven years. Management’s
emphasis on high-quality companies with strong
margins gives it some defensive characteristics.
Comanager Rusty Johnson has been at the helm
since the fund was launched in
1998
, and comanager
Craig Shaw has been on board for five years.
American Funds New World
NEWFX
This is a great option for those who want to invest
conservatively. American mixes emerging-markets
companies with developed-markets companies that
derive a big chunk of their business from emerging
markets. It makes the fund tamer than its peers, and
that’s not a bad thing given how volatile emerging
markets are. I also like the skill and depth of the team
and the low costs here.
Matthews Asia Dividend
MAPIX
You don’t get all of emerging markets covered here,
but Matthews’ expertise in Asia makes it worthwhile.
The fund’s dividend focus serves as a nice reality
check in an area that sometimes can have more hype
than substance. Managers Yu Zhang and Robert
Horrocks have solid records here and at other
Matthews funds.
More Ideas
Morningstar senior analyst Laura Lallos shares some
great ideas for small-cap funds in Research on
Page
8
. In the Contrarian on Page
10
, I have our
annual Buy the Unloved ideas for you.
We are facing another tricky market environment that
seems to offer equal parts peril and opportunity.
I hope some of these ideas can help you adjust your
portfolio so that you are well-positioned for the
coming years.
K