Morningstar Advisor - August/September 2012 - (Page 24)

Investment Briefs He was replaced by Sean Gavin, who runs Fidelity Select Transportation FSRFX. Impact: Negative Analyst Rating: Neutral Russ’ Take: What is good news for shareholders in Fidelity Equity Dividend Income is clearly bad news for shareholders in Fidelity Value Discovery. They lose an experienced manager with a good track record and get a less-experienced manager without much of a record. Legg Mason Capital Management Value LMVTX Change: Bill Miller stepped down as lead Analyst Rating: Neutral Russ’ Take: For Global Stock, it is a mixed bag. Eiswert has a strong four-year track record at the tech fund, but Gensler had a strong sector-fund record when he took over Global, and his tenure has been disappointing. Gensler was much more of a trader and short-term investor than most of his T. Rowe peers, so it will be interesting to see how Eiswert adapts to running a diversified fund. Third Avenue Value TAVFX Change: On March 1, Marty Whitman stepped down as manager of Third Avenue Value and handed the reins to comanager Ian Lapey. Whitman remains at the firm. Impact: Neutral Analyst Rating: Silver Russ’ Take: Third Avenue had signaled this transition was on the way, and Lapey has been a key part of the process for years. Our thesis for the fund has largely been based on Lapey in recent years. After becoming lead manager in March, Lapey quickly trimmed the fund’s huge weighting in Hong Kong real estate stocks to dial down the fund’s risk level. Fidelity Dividend Growth FDGFX Larry Rakers took the helm in 2008, and the fund has beaten the S&P 500 by a cumulative 40.6% to 29.8% in that time. Moreover, Rakers produced brilliant results at Fidelity Balanced FBALX before that. The fact that the fund struggled before he took over isn’t really meaningful. Rakers’ eclectic style is very different from his predecessor’s mega-cap quality strategy. Rakers takes a value approach, but he tries to get Fidelity analysts’ best ideas into his wide-ranging portfolio. This is one of the best Fidelity funds—only many investors haven’t figured it out yet. Funds to Avoid manager on April 30, and comanager Sam Peters took over. Miller remains chairman of Legg Mason. Impact: Neutral Analyst Rating: Neutral Russ’ Take: We can’t muster much enthusiasm for the fund either way. It’s a shame to see Miller go out on a down note. Peters’ record at another Legg Mason fund does not inspire confidence. In addition, Legg Mason’s analyst staff is middling at best. Parnassus Equity Income PRBLX Change: Benjamin Allen was named coman- Fidelity Magellan FMAGX This fund’s manager change is less encouraging than Fidelity Dividend Growth’s. Jeff Feingold’s record at his previous fund was good but not as good as Rakers’. Also, he’s moved up to a much larger fund, and we don’t yet have a lot to go on in terms of strategy or returns since he took over in September 2011. Maybe he’ll have the right combination to turn Fidelity Magellan around, but it’s too early to get on board. Columbia Value & Restructuring UMBIX Whether it’s David Williams’ retirement or the fund’s 10.8% loss in 2011 that has spurred redemptions, it’s probably the right thing for investors to do. Williams built a brilliant record largely on his own with little help from analysts or comanagers. Guy Pope and J. Nicholas Smith were named comanagers in 2009, but they became lead managers only this April. Thus, the fund really has a clean slate, and management must prove itself. Fidelity Diversified International FDIVX This fund has suffered from asset bloat. Its strong return years are far in the past. The only positive is that it has been redeemed for a few years now and may be approaching a more manageable level. If the $23 billion fund were to shed a few billion more, it might be worth a look again. ager on May 1. Allen has been director of research at the firm, so it’s fair to say he’s had a hand in the fund’s past success. However, we don’t have a record for him. Allen and Todd Ahlsten will split coverage of the holdings, but Ahlsten will retain final say over the portfolio. Impact: Neutral Analyst Rating: Bronze Russ’ Take: The change is not dramatic, but we’ll be monitoring the fund to see what impact it has. We have started the fund with a Bronze rating, given Ahlsten’s strong record. T. Rowe Price Global Stock PRGSX Change: Gotta love how far in advance T. Rowe’s manager changes are telegraphed. In this case, Rob Gensler is going to retire and hand the reins of T. Rowe Price Global Stock to David Eiswert on Oct. 1. Eiswert had run T. Rowe Price Global Technology PRGTX. Impact: Neutral Funds Under Fire: Keep or Dump? Russel Kinnel, Morningstar’s director of fund research, looked at funds with the heavy year-to-date redemptions and selected three to hold and three to sell. Good Funds Worth a Look Davis New York Venture NYVTX Selected American SLADX It’s understandable that these funds, which are near clones, would be redeemed with crummy five-year returns. A fondness for financials and a lack of Apple AAPL shares have made for a slump. However, Chris Davis and Ken Feinberg have produced strong returns over the 10- and 15-year periods, and they haven’t changed their stripes. They still run a Warren Buffett strategy supported by deep research as they seek firms with good management and the ability to reinvest capital at a high rate of return. 24 Morningstar Advisor August/September 2012

Table of Contents for the Digital Edition of Morningstar Advisor - August/September 2012

Morningstar Advisor - August/September 2012
Contents
Contributors
Letter From the Editor
How Much of the Behavior Gap Is Your Fault?
What’s Your View of the Muni-Bond Market?
A Balanced Life
How to Get to Know EMMA
A Strong, Robust Fund Business
Dividend Investing Abroad
Four Picks for the Present
Investment Briefs
Fund Expenses Through the Decades
Autos on Comeback Track
Lessons From the Muni-Bond Rebound
Municipal-Bond Landscape Shifts
Municipal Bonds 101
A Tale of Two Cities
Unraveling the Mysteries of Money
Small Companies Mean the World to Him
The Chinese Art Market and the Origin of Bubbles
The Myth of the Dumb Investor
Stocks That Can Stand the Heat
Our Favorite Mutual Funds
50 Most Popular ETFs
Undervalued Stocks With Wide Moats
The War on Savers

Morningstar Advisor - August/September 2012