(PUB) Investing 2016

13

March 2016

Morningstar FundInvestor

Akre Focus Is at the Top of the Heap Leaders & Laggards | Robert Goldsborough

Laggards Despite very strong long-term performance, Third Avenue Real Estate Value TAREX has lagged 98% of its global real estate competitors over the past year. Brookdale Senior Living BKD , timberland owner and manager Rayonier RYN , and Singapore real estate development group City Developments have all hurt the fund. The fund has used the weakness to boost its positions in Rayonier and City Developments. The fund stands out from its peers because it favors real estate operating companies over REITS . Thus, you’ll often find it near the top or bottom in a short time period. Over the past year, Silver-rated ClearBridge Aggres- sive Growth SHRAX has trailed 95% of its large- growth peers. That’s a marked contrast to the previous several years, when the fund had delivered strong performance, and it’s also a blemish on a strong long- term track record—the fund has bested nearly two out of every three peers in the trailing 15 -year period. Its recent weakness has come at the hands of several culprits, including an overweighting to the energy sector—names like Anadarko Petroleum APC and Newfield Exploration NFX in particular have detracted—as well as poor stock selection in the information technology sector. Neutral-rated PIMCO Unconstrained Bond PUBDX has struggled over the past year, lagging nearly eight out of every 10 competing non-traditional-bond funds. PIMCO Unconstrained Bond’s lead manager Marc Seidner had positioned this fund for a relatively healthy economy. Once fears of slowing growth in China hammered the markets, the fund’s negative duration and exposure to credit and emerging-markets debt resulted in underperformance. K Contact Robert at robert.goldsborough@morningstar.com

Leaders Akre Focus Retail AKREX , with a Morningstar Analyst Rating of Silver, has continued its impressive run of outperformance, besting 96% of its mid-growth peers over the 12 months. Lead manager Chuck Akre and his team have made a significant overweighting in the financials sector this past year. Financials have gotten hammered, but Akre’s picks like Markel MKL , MasterCard MA , and Visa V have done quite well. Other strong performers include retailers Dollar Tree Stores DLTR and O’Reilly ORLY . large-value fund. The fund has outpaced 95% of its peers over the past year and more than nine out of 10 competitors over the past five and 10 years. Davis buys steady free-cash-flow-generating firms whose future dividends will grow commensurate with cash flows. Meaningful contributors to outperformance this past year have included top holdings Microsoft MSFT and Johnson & Johnson JNJ , as well as Public Storage PSA and insurer Chubb CB , which recently was acquired by ACE . Silver-rated Vanguard Short-Term Bond ’s VBIRX big weighting in government bonds means the fund outperforms when investors grow wary of lower- quality corporate bonds. We’ve just had a bout of credit selling, leading the fund to beat 97% of its short-term bond peers the past 12 months. Bronze-rated Hennessy Focus HFCSX has bested 96% of its mid-growth competitors over the past year and 98% of its category peers over the past five years. Among the fund’s recent winners have been top holding O’Reilly Automotive ORLY , American Wood- mark AMWD , Markel MKL , and Alphabet GOOGL . Columbia Dividend Income ’s GSFTX lead manager Scott Davis has stuck to his knitting with this

Ten Best-Performing Funds

Fund Name

YTD Cat Rank %

FMI International

1

First Eagle Overseas A 1 JOHCM International Selec 1 Jensen Quality Growth J 1 Mairs & Power Growth Inv 1 Permanent Portfolio 1 Vanguard Interm-Term Bond 1 ASTON/River Road Select V 2 Appleseed Investor 2 FAM Value Investor 2

Ten Worst-Performing Funds

Fund Name CGM Focus

YTD Cat Rank %

100 Dreyfus Opportunistic Sma 100 Matthews China Investor 100 T. Rowe Price Media & Tel 100 Vanguard Precious Metals 100 Eventide Gilead N 99 Fairholme 99 Fidelity OTC 99 Oakmark Global I 99 Oakmark Select I 99