Morningstar Advisor - Fall 2007 - 67

gas gathering, transmission, and treating and processing assets. That asset base allows Crosstex to provide a full suite of field services to natural-gas producers, who pay Crosstex to gather natural gas at the wellhead, remove any impurities, separate the gas from natural-gas liquids, provide compression and transportation to market hubs or interstate pipelines, and market their natural gas to utilities and end users. We especially like Crosstex’s investments in Barnett Shale gathering and processing assets, which we expect will drive significant growth over the next several years. JP Vanguard Convertible Securities VCVSX $18K all-weather, absolute-return-driven strategies consider a wide array of securities, including those off the beaten path. In that spirit, these foreign investment options—a free-wheeling value manager, an ETF that targets dividendpaying foreign stocks, and a high-yielding Kiwi utility—can add diversity and, thus, a measure of downside protection to a portfolio. Overview by Jeffrey Ptak Mutual Qualified TEQIX $28K MSCI EAFE TR 19 10000 cash dividends paid, giving this fund a more conservative profile. First of all, it steers clear of volatile emerging markets. That means it sacrifices the return potential of that market segment, but it also avoids the turbulence those stocks can be prone to. Second, the fact that its holdings pay dividends signals financial strength. Indeed, its holdings are composed of giant global firms with healthy balance sheets that have generated above-average returns on equity. But its dividend focus also gives it some biases. For example, like most other dividendoriented funds, it has an oversized helping of financial stocks. Europe also holds sway over Japan here since fewer Japanese stocks pay dividends. Despite those quirks, this ETF can be a sturdy core international holding. SM Telecom Corporation of New Zealand NZT 03 04 05 06 07 14 22000 DJ Moderate Portfolio 03 04 05 06 18000 07 14000 Convertible securities, by their nature, have a softer downside relative to equities. 10000 That’s because convertible bonds have a claim on a company’s assets and pay coupons just like regular bonds do. They don’t give up the upside, though, because they can be converted to equity at a certain conversion price. That can make convertibles act more like stocks when the stock price gets close to the conversion price. This fund’s manager, Larry Keele, tries to control that risk by keeping an eye on the potential downside of his picks. He favors WisdomTree International Large Cap DOL converts whose underlying stocks are still Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 trading far enough away from the strike price to $13K offer some margin of safety. He also pays close Feb-03Sep-03 May-04 Feb-05Sep-05Apr-06 Feb-07 Mar-03 Feb-04 Oct-04 Jun-05 Feb-06 Oct-06 Jun-07 Apr-03 Mar-04 May-03 Jun-03 Jul-03 Aug-03 Jun-04 Mar-05 Nov-05 Jul-06 Mar-07 Oct-03 Jul-04 Apr-05 Mar-06 Nov-06 Jul-07 Aug-04 May-05 Sep-04 Jul-05 May-06 Apr-07 Aug-05 Jun-06 May-07 Oct-05 Aug-06 Sep-06 Aug-07 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 attention to the structure and pricing of the se12 Nov-03 Dec-03 Nov-04 Apr-04 Dec-04 Dec-05 Dec-06 Feb-03 Oct-03 Jun-04 Feb-05 Oct-05 Jun-06 Apr-07 Mar-03 Nov-03 Jul-04 Mar-05 Nov-05 Jul-06 May-07 Apr-03 Dec-03 Aug-04 Apr-05 Dec-05 Aug-06 Jun-07 May-03 Feb-04 Nov-04 Jul-05 Mar-06 Nov-06 Jul-07 Jun-03 Mar-04 Dec-04 Aug-05 Apr-06 Jul-03 Apr-04 Aug-03 May-04 Sep-03 Sep-04 May-05 Sep-05 Oct-06 curities and the credit Jun-05 ofMay-06 quality theSep-06 Aug-07 issuers. KD MF The world is Mutual Qualified’s playground, and it uses of its broad universe to avoid potholes that come with more-benchmark-aware strategies. This fund’s mandate allows for a 50/50 split between U.S. stocks and international, and it has the leeway to invest in small firms. The fund’s uncommon approach, which includes investing in distressed debt and merger-arbitrage situations, provides opportunities more run-of-the-mill options can’t. The fund’s strict value discipline and ability to own securities in a variety of market corners has helped keep it out of hot water in tough times. Note its strong showings during the bear market of the early 2000s. KD MF $22K 18 14 S&P 500 03 04 05 06 07 Oct-04 Feb-06 Dec-06 Feb-07 MSCI EAFE TR Mar-07 International In a sense, downside protection is a matter of focus. A manager hemmed into a particular area of the style box or investing theme, for example, doesn’t have the leeway to take refuge in areas that offer a better risk/reward tradeoff. By contrast, some of the most successful 06 07 This ETF provides exposure to big dividend paying companies headquartered in developed markets. Like other WisdomTree ETFs, it tracks a benchmark that ranks its holdings not by market capitalization but by annual E Though Telecom Corporation of New Zealand faces an uncertain future, we think it looks compelling on a few levels. For one, there’s the stock’s plump dividend yield, which recently approached 9%. Of course, hefty yields can prove fleeting. Yet, here too there’s reason for optimism, as NZT throws off scads of free cash by dint of its position as incumbent telecom services provider in New Zealand. From that perch, NZT has been able to round out its product lineup while keeping rivals largely at bay. Consequently, as competitors encroach further upon NZT’s turf (regulators are expected to grant access to the firm’s networks at wholesale rates), its diverse product offerings and Jan-03 well-established customer relationships should Jan-04 Jan-05 Jan-06 Jan-07 provide ballast. EvenApr-05allowing Oct-06 Jun-07 afterNov-05 Jul-06Feb-07 for the Jul-07 Feb-03 Oct-03 Jun-04 Feb-05 Oct-05 Jun-06 Mar-07 Mar-03 Feb-04 Apr-03 Mar-04 May-03 Apr-04 Mar-05 Feb-06 Jun-03 May-04 Jul-03 Aug-03 Sep-03 Jul-04 May-05 Mar-06 Jun-05 Apr-06 Jul-05 May-06 Apr-07 Aug-05 Sep-05 Aug-06 May-07 Sep-06 Aug-07 revenue declineNov-04 forecast in the years that Nov-03 Aug-04 we Dec-05 Sep-04 Oct-04 Dec-04 ahead,Dec-03 medium-term opportunities to we see Nov-06 Dec-06 reduce costs through efficiencies, thereby allowing the firm to maintain its prodigious cash generation. JP S MorningstarAdvisor.com 67
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Morningstar Advisor - Fall 2007

Table of Contents for the Digital Edition of Morningstar Advisor - Fall 2007

Morningstar Advisor Fall 2007
Features
Departments
Letter from the Editor
Inbox
10 Years After: Developing Markets Make Progress
Research Briefs
Investors Should Adjust Their Home Bias
Few Mutual Funds Exhibit Serial Correlation
Valuating ETFs, the Equity Analyst's Way
It’s All About Location
See the World (Differently)
The Return of the Global Flexible Investor
Map of International Value
Sound as a Loonie?
Fair Exchange
In Their Own Worlds
A Good Read
Putting Their Heads Together
Buying Protection
Scoping Out Easy-to-Use Funds
Finding Good Stewards
Consumer Firms Go Global
Mutual Fund Analyst Picks
Undervalued Stocks
Most Popular Variable Annuities
New at Morningstar
The Whole Wide World
Morningstar Advisor - Fall 2007 - Morningstar Advisor Fall 2007
Morningstar Advisor - Fall 2007 - Cover2
Morningstar Advisor - Fall 2007 - 1
Morningstar Advisor - Fall 2007 - 2
Morningstar Advisor - Fall 2007 - Features
Morningstar Advisor - Fall 2007 - Departments
Morningstar Advisor - Fall 2007 - 5
Morningstar Advisor - Fall 2007 - 6
Morningstar Advisor - Fall 2007 - Letter from the Editor
Morningstar Advisor - Fall 2007 - 8
Morningstar Advisor - Fall 2007 - Inbox
Morningstar Advisor - Fall 2007 - 10 Years After: Developing Markets Make Progress
Morningstar Advisor - Fall 2007 - 11
Morningstar Advisor - Fall 2007 - 12
Morningstar Advisor - Fall 2007 - Research Briefs
Morningstar Advisor - Fall 2007 - 14
Morningstar Advisor - Fall 2007 - Investors Should Adjust Their Home Bias
Morningstar Advisor - Fall 2007 - 16
Morningstar Advisor - Fall 2007 - Few Mutual Funds Exhibit Serial Correlation
Morningstar Advisor - Fall 2007 - 18
Morningstar Advisor - Fall 2007 - 19
Morningstar Advisor - Fall 2007 - Valuating ETFs, the Equity Analyst's Way
Morningstar Advisor - Fall 2007 - 21
Morningstar Advisor - Fall 2007 - 22
Morningstar Advisor - Fall 2007 - 23
Morningstar Advisor - Fall 2007 - It’s All About Location
Morningstar Advisor - Fall 2007 - 25
Morningstar Advisor - Fall 2007 - 26
Morningstar Advisor - Fall 2007 - 27
Morningstar Advisor - Fall 2007 - See the World (Differently)
Morningstar Advisor - Fall 2007 - 29
Morningstar Advisor - Fall 2007 - 30
Morningstar Advisor - Fall 2007 - 31
Morningstar Advisor - Fall 2007 - 32
Morningstar Advisor - Fall 2007 - The Return of the Global Flexible Investor
Morningstar Advisor - Fall 2007 - 34
Morningstar Advisor - Fall 2007 - 35
Morningstar Advisor - Fall 2007 - 36
Morningstar Advisor - Fall 2007 - 37
Morningstar Advisor - Fall 2007 - 38
Morningstar Advisor - Fall 2007 - 39
Morningstar Advisor - Fall 2007 - Map of International Value
Morningstar Advisor - Fall 2007 - 41
Morningstar Advisor - Fall 2007 - Sound as a Loonie?
Morningstar Advisor - Fall 2007 - 43
Morningstar Advisor - Fall 2007 - 44
Morningstar Advisor - Fall 2007 - 45
Morningstar Advisor - Fall 2007 - Fair Exchange
Morningstar Advisor - Fall 2007 - 47
Morningstar Advisor - Fall 2007 - 48
Morningstar Advisor - Fall 2007 - In Their Own Worlds
Morningstar Advisor - Fall 2007 - 50
Morningstar Advisor - Fall 2007 - 51
Morningstar Advisor - Fall 2007 - 52
Morningstar Advisor - Fall 2007 - 53
Morningstar Advisor - Fall 2007 - 54
Morningstar Advisor - Fall 2007 - 55
Morningstar Advisor - Fall 2007 - A Good Read
Morningstar Advisor - Fall 2007 - 57
Morningstar Advisor - Fall 2007 - 58
Morningstar Advisor - Fall 2007 - 59
Morningstar Advisor - Fall 2007 - Putting Their Heads Together
Morningstar Advisor - Fall 2007 - 61
Morningstar Advisor - Fall 2007 - 62
Morningstar Advisor - Fall 2007 - 63
Morningstar Advisor - Fall 2007 - Buying Protection
Morningstar Advisor - Fall 2007 - 65
Morningstar Advisor - Fall 2007 - 66
Morningstar Advisor - Fall 2007 - 67
Morningstar Advisor - Fall 2007 - 68
Morningstar Advisor - Fall 2007 - 69
Morningstar Advisor - Fall 2007 - 70
Morningstar Advisor - Fall 2007 - 71
Morningstar Advisor - Fall 2007 - Scoping Out Easy-to-Use Funds
Morningstar Advisor - Fall 2007 - 73
Morningstar Advisor - Fall 2007 - 74
Morningstar Advisor - Fall 2007 - 75
Morningstar Advisor - Fall 2007 - Finding Good Stewards
Morningstar Advisor - Fall 2007 - 77
Morningstar Advisor - Fall 2007 - Consumer Firms Go Global
Morningstar Advisor - Fall 2007 - 79
Morningstar Advisor - Fall 2007 - 80
Morningstar Advisor - Fall 2007 - 81
Morningstar Advisor - Fall 2007 - Mutual Fund Analyst Picks
Morningstar Advisor - Fall 2007 - 83
Morningstar Advisor - Fall 2007 - 84
Morningstar Advisor - Fall 2007 - 85
Morningstar Advisor - Fall 2007 - Undervalued Stocks
Morningstar Advisor - Fall 2007 - 87
Morningstar Advisor - Fall 2007 - Most Popular Variable Annuities
Morningstar Advisor - Fall 2007 - 89
Morningstar Advisor - Fall 2007 - 90
Morningstar Advisor - Fall 2007 - 91
Morningstar Advisor - Fall 2007 - 92
Morningstar Advisor - Fall 2007 - New at Morningstar
Morningstar Advisor - Fall 2007 - 94
Morningstar Advisor - Fall 2007 - 95
Morningstar Advisor - Fall 2007 - The Whole Wide World
Morningstar Advisor - Fall 2007 - Cover3
Morningstar Advisor - Fall 2007 - Cover4
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