Morningstar Advisor - Summer 2008 - (Page 62)

Undiscovered Managers activism, bankruptcy, convertibles, and distress.” Through the years, Winters has thus tended to build more-eclectic portfolios. Never have they looked much like any market index or the vast majority of other portfolios. In the late 1990s and early 2000s, for example, his training led him to play the tobacco-company consolidations around the world, even as many investors were running away from tobacco on fears of big legal settlements. The early 2000s, too, brought opportunities in distressed investing, or investments in firms going through bankruptcy. For example, Winters’ charge at the time, Mutual Discovery TEDIX, had invested in the bonds of bankrupt British cable firm NTL. All the while, Winters’ portfolios have been centered around cheap stocks that have often fallen out of favor with investors or that have been largely ignored, such as Washington Post WPO, part of Wintergreen’s portfolio. Media stocks have been hard-hit, but Winters sees value in the firm’s education services, through its Kaplan unit, which accounted for half of that firm’s revenue in 2007. Tobacco also still plays a big role in the portfolio but, in some cases, for different reasons. Japan Tobacco, for example, Wintergreen’s largest holding with nearly 10% of assets, is a favorite for its cash generation as well as for some savvy financing moves its management made when it bought U.K. tobacco firm Gallagher. Winters says the market hasn’t yet caught on to this yet. Running His Own Firm marketing firm. We wanted maximum flexibility, not to be an index-hugger.” There are differences between running your own mutual fund company and being part of a larger organization, says Liz Cohernour, Winters’ business partner and chief operations officer. “However independent different 16000 branches are, there’s still a lot of time spent connecting through the parent,” says 14000 Cohernour, who had also served as general counsel at Mutual Series under Price and later 12000 Franklin Templeton. Even in building his own firm, Winters went against the grain. First, the very fact that he started a mutual fund, instead of going the hedge fund route, in the wake of the mutual fund trading scandal earlier this decade made him unusual. Complaints by established mutual fund companies about new regulations and higher costs didn’t scare him off. Then, he went no-load, even though he was well-known and respected in the broker network that had sold Mutual Series funds as a part of Franklin Templeton. And he decided he didn’t want to have a marketing budget or a sales department. “One of the things I enjoyed was managing money for friends and family,” says Winters, who doesn’t come from a wealthy background. “I like the democratic idea of the mutual fund. The people who need the most help in the long run with their finances are people who have relatively modest means. We view every dollar as precious.” Wintergreen’s investment minimum, at $10,000, is arguably too high to be truly democratic, but he is looking for long-term investors who understand and are committed to his process. “We wanted to have it be where investors find us, as opposed to really marketing to them to fit some asset-allocation desires,” he says. Advisors Appreciative 10000 David Winters Wintergreen Fund WGRNX $16K MSCI EAFE TR 14 12 03 04 05 06 07 08 Category World Stock Morningstar Rating — Minimum Investment $10,000 Data as of June 30, 2008. Expense Ratio (%) 1.85 1-Yr Anl Total Rtn (%) -2.98 1-Yr Anl TR % Rank Cat 16 “I like the fund because of its ability to be wide-ranging, much like a hedge fund. He’s not boxed in by Morningstar boxes,” says Lewis Feb-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Altfest, a fee-only financial planner in New York Mar-03Sep-03Mar-04Sep-04Mar-05Sep-05Mar-06Sep-06Mar-07 Oct-07 Apr-08 Apr-03 Oct-03 Apr-04 Oct-04 Apr-05 Oct-05 Apr-06 Oct-06 Apr-07 Feb-08 May-03 Dec-03 Jun-04 Feb-05Jul-05 May-06 Feb-07Jul-07 Mar-08 Jun-03 Jul-03 May-04Nov-04May-05Nov-05 Jun-06 Aug-03 Jul-04 Aug-04 Jun-05 Aug-05 Jul-06 May-07 Aug-06 Jun-07 Aug-07 May-08 Jun-08 City. “David Winters came to one of our Nov-07 Nov-03 Feb-04 Dec-04 Dec-05 Feb-06 Nov-06 Sep-07 Dec-06 Dec-07 annual meetings, and he charmed everyone with his knowledge and his intensity.” Vern Hayden, CFP, of Hayden Wealth Management and author of Getting an Investment Game Plan, is also a fan, saying that Winters has a unique ability to pick stocks. “I don’t have to understand it to use it,” Hayden says. “He’s smart, and I have a lot of confidence in his ability.” Altfest and Hayden have the appropriate attitude when it comes to Wintergreen. Once investors believe in him, trusting the fund, as Hayden says, “is liberating.” K Bridget B. Hughes, CFA, is a senior mutual fund analyst with Morningstar. Winters says he never felt constricted at Mutual Series or forced to focus on marketing, but he had his own ideas of how a mutual fund company should be run. In 2005, Winters left Mutual Series, after 18 years, and started his own firm. “I had an epiphany,” Winters says. “We wanted to create an investment company, not a Most of the investors who have found Wintergreen appreciate Winters’ flexibility and the fund’s distinctions. 62 Morningstar Advisor Summer 2008

Table of Contents Feed for the Digital Edition of Morningstar Advisor - Summer 2008

Morningstar Advisor - Summer 2008 Contents Letter from the Editor Contributors Inbox College Planning: Solutions and Concerns ETFs: The Next Chapter Engineering Financial Advice Investment Briefs Flexible vs. Style-Pure Managers: The Evidence Forging a New Commodity Index Work Your Way Through College Planning Sizing Up the Options Best and Worst 529 College-Savings Plans A 529 Travel Guide 10 Tax-Smart Tips for College-Savings Planning Global Dialogue How Sequoia Cranks Out Good Returns Year After Year The Many Layers of David Winters Living on the Edge Stocks to Buy Once a Decade With Munis Feeling the Pain, Some Opportunities Arise Health Care Provides Shelter from Economic Storm Help Your Clients Get More Out of Their Bond Portfolios Mutual Fund Analyst Picks 50 Most Popular Equity ETFs Undervalued Stocks Most Popular Variable Annuities New at Morningstar New on MorningstarAdvisor.com Closer to Fine

Morningstar Advisor - Summer 2008

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