(PUB) Investing 2016

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Top-Performing Medalists of 2015 Tracking Morningstar Analyst Ratings | Russel Kinnel

Vanguard Intermediate-Term Investment-Grade VFICX returned 1 . 5% —tops in the corporate-bond cat- egory. The Silver-rated fund consistently takes on less credit and interest-rate risk than its peers, and that was a good thing in 2015 . Gold-rated Vanguard Wellesley Income VWINX was the rare conservative-allocation fund to stay in positive territory thanks to its cautious credit posi- tioning. Many funds in the category have high-yield debt in order to boost their payout, but this fund’s rock-bottom fees allow for a competitive yield while steering clear of junk. Morgan Stanley Institutional Growth MSEGX posted a robust 11 . 5% return to finish in the top 3% in 2015 . Growth managers have summarized 2015 as being all about FANG s, and this Gold-rated fund had all four stocks in that acronym: Facebook FB , Amazon.com AMZN , Netflix NFLX , and Google GOOG (now Alphabet ). Of course, any fund with all four is quite aggressive. Silver-rated Conestoga Small Cap CCASX returned 8% to land in the top 2% following a dreadful 2014 in which it finished in the bottom 4% of its category. That’s a reminder of the value of sticking with a good fund that’s had a bad year. The fund has 40% of assets in tech stocks, and it had a wide array of win- ners in that sector. Bronze-rated Clipper CFIMX is another fund on the rebound, though it is rebounding from a much longer slump. The fund gained 6 . 4% to land in the top 1% of the large-blend peer group. Insurer Markel MKL and Amazon led the way for this fund. This is another win for those influenced by Warren Buffett. Fidelity Small Cap Stock FSLCX just posted its sec- ond strong year following four bad years. Man- ager Lionel Harris emphasizes high-quality measures such as robust margins, stable businesses, and minimal debt. That has helped the Bronze-rated fund to play defense of late, though it did have one huge winner in Coca-Cola Bottling COKE , which doubled in 2015 . K

It was a wild and rather rough year for investing. But some funds fared quite well. Let’s take a look at the Morningstar Medalists that had returns in the top two percentiles of their respective categories for 2015 . Our Morningstar Analyst Ratings are geared toward the long term, but they certainly do not preclude medalists from having an outstanding year every now and then, and when they do, it’s worth understand- ing why. All told, nine medalists in the Morningstar 500 had returns that landed in the top 2% of their peers. Five medalists had bottom 2% performance, and you can see my take on them on mfi.morningstar.com. Brown Capital Management Small Company BCSIX returned 8 . 8% to finish in the top percentile of small-growth funds. The Gold fund reeled off some huge gainers in healthcare and technology. Cantel Medical CMN , Tyler Technologies TYL , and Manhattan Associates MANH gained more than 40% in 2015 . Fidelity Overseas FOSFX returned 8 . 3% for a top-per- centile finish in the foreign large-blend Morningstar Category. We upgraded the fund to Bronze in January 2015 because we had been impressed by Vincent Montemaggiore’s Buffett-esque approach to value. Over four years at the fund he has nearly tripled the returns of the MSCI ACWI ex USA Index, thanks to an array of steady names with Morningstar Eco- nomic Moat Ratings of wide, such as Anheuser-Busch Inbev ABI and Sanofi SAN . That kind of outperform- ance won’t last, but the fund’s $5 billion asset base gives Montemaggiore room to grow. Gold-rated T. Rowe Price Capital Appreciation PRWCX probably can’t keep up its amazing run, but you’ve got to hand it to David Giroux. In 2015 , the fund gained 5 . 4% to finish in the top percentile of its category. He hit on a wide array of winners, including Fiserv FISV and AutoZone AZO , in 2015 .

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.