Morningstar Advisor - Summer 2007 - 54

Investments à la Carte ment, with the firm’s strong lineup cementing its position as the second-largest handset maker. JP MF SA Thornburg Domestic Equity Composite Oak Value OAKVX Several former growth favorites, such as Oracle ORCL, eBay EBAY, and Time Warner, grace this compact portfolio. In a recent Morningstar interview, Oak Value’s comanager Larry Coats highlights how some very good companies emerged from the late 1990s and have evolved into stellar business models today. He gives eBay as one such example and points to how acquisitions PayPal and Skype further solidify the underlying value that comes from eBay’s popularity. Oracle is in a similar boat. Coats says that Oracle’s business has been transformed. Roughly 50% of Oracle’s revenues now come from recurring business, which is an important change from the late 1990s, when the company relied more on upfront licensing fees. The clincher for eBay, Oracle, and the rest of the stocks in this portfolio, however, is that their valuation has to be well below what the team thinks the company’s future cash flows are worth. The approach at Oak Value has been steadily applied, and we like that it is also flexible enough to recognize good values in untraditional areas. KD Veteran manager William Fries uses a proven bottom-up approach at this successful separate-account strategy. Fries, who also runs several other winning strategies and mutual funds for Thornburg, looks for three types of firms: deep-value plays, emerging-growth stories, and consistent earners. The latter are firms with dominant franchises and steady streams of income that Fries believes trade at a discount to the quality of their underlying business. This portfolio is now peppered with such former highfliers as Microsoft, Pfizer, Oracle, Comcast, and Dell. Several of these holdings have already started to rebound and are one of the reasons this strategy has topped most of its rivals lately. Fries’ distinct approach will put him at odds with the benchmark and his peers at times, but over the long haul, the results have been great. MB formance into hot areas, most notably traditional value sectors that have fared well in recent months and years. But eclectic security selection—such as a growth manager seeking sources of earnings growth in unorthodox places—can also be the hallmark of a nimble investment mind. The catch, of course, is that any such idea should be founded on a prudent investment thesis. With that in mind, here are a few examples of unconventional, yet still worthy, growth ideas. S Fuel Tech FTEK Growth Overview by Jeffrey Ptak Just as we’ve seen value managers fishing from the growth pond, growth-minded investors have turned their gaze toward lessfamiliar realms. For example, financials, industrials, and energy are in; large-cap tech and health care are seen by some as passé. True, there’s danger aplenty in chasing per- “Slag“ isn’t exactly a term that conjures visions of runaway growth. Yet, there’s a good business in this ashy byproduct that accumulates on the side of a coal-fired power plant’s furnace. Because slag reduces the heat rate and efficiency of power plants, operators of those plants have to remove it. Ordinarily, slag abatement is costly and timeintensive. However, Fuel Tech has developed a proprietary technology that prevents slag formation, thereby saving plant operators significant time and expense. The growth outlook is bright, as high natural gas prices have sparked a renaissance in new coal-fired plant builds, with utilities expanding their coalfired facilities at the fastest rate in 40 years. With scant competition and the patent-protection afforded the underlying slag-reduction Mutual Funds Vanguard Windsor II Growth of $10,000 $25K Oak Value Growth of $10,000 $19K 16 S&P 500 Longleaf Partners International Growth of $10,000 $29K MSCI EAFE TR 19 UBS Equity Alpha Growth of $10,000 $12K 19 S&P 500 03 04 05 06 07 11 S&P 500 03 04 05 06 07 03 04 05 06 07 06 07 Income pick: Dirt-cheap expenses allow fund to pay out more. Most assets run by Barrow, which loves undervalued firms with high dividends. Value pick: Manager Larry Coats finds values in untraditional areas. Former technology highfliers, including eBay and Oracle, dot this compact portfolio. International pick: Hedges its exposure to foreign currencies. Managers ignore country and sector weightings in this concentrated portfolio. Alternative pick: Runs a 130/30 long/short strategy. Full market exposure makes it more aggressive than rivals, but strategy is sound and conservative. 54 Morningstar Advisor Summer 2007

Morningstar Advisor - Summer 2007

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

Morningstar Advisor - Summer 2007
Contents
Letter from the Publisher
Get to Know the Bond “All-Stars”
Research Briefs
Our Stewardship Test Gets Tougher
Save It for Later
Too Many Oranges
Best of Both Worlds
No Two Clients Are Alike
When It Comes to VAs, It’s Seller Beware
Hands On: Finding the Suitable Fund Share Class for Your Client
Fund Style Can Drift Off Course
Sticking to Their Style, Through Thick and Thin
Marathon Man
Growth, With a Chaser
A Menu of Ideas to Fill Five Market Baskets
Funds: Finding Funds with Conviction
Stocks: So You Say You Want Income?
All Eyes on China
Mutual Fund Analyst Picks
Undervalued Stocks
Most Popular Variable Annuities
What’s New at Morningstar and on the Web
The Advisor’s Economic Moat
Morningstar Advisor - Summer 2007 - Intro
Morningstar Advisor - Summer 2007 - Morningstar Advisor - Summer 2007
Morningstar Advisor - Summer 2007 - Cover2
Morningstar Advisor - Summer 2007 - Contents
Morningstar Advisor - Summer 2007 - 2
Morningstar Advisor - Summer 2007 - 3
Morningstar Advisor - Summer 2007 - 4
Morningstar Advisor - Summer 2007 - Letter from the Publisher
Morningstar Advisor - Summer 2007 - 6
Morningstar Advisor - Summer 2007 - 7
Morningstar Advisor - Summer 2007 - Get to Know the Bond “All-Stars”
Morningstar Advisor - Summer 2007 - 9
Morningstar Advisor - Summer 2007 - Research Briefs
Morningstar Advisor - Summer 2007 - 11
Morningstar Advisor - Summer 2007 - Our Stewardship Test Gets Tougher
Morningstar Advisor - Summer 2007 - 13
Morningstar Advisor - Summer 2007 - Save It for Later
Morningstar Advisor - Summer 2007 - 15
Morningstar Advisor - Summer 2007 - Too Many Oranges
Morningstar Advisor - Summer 2007 - 17
Morningstar Advisor - Summer 2007 - Best of Both Worlds
Morningstar Advisor - Summer 2007 - 19
Morningstar Advisor - Summer 2007 - 20
Morningstar Advisor - Summer 2007 - No Two Clients Are Alike
Morningstar Advisor - Summer 2007 - When It Comes to VAs, It’s Seller Beware
Morningstar Advisor - Summer 2007 - 23
Morningstar Advisor - Summer 2007 - 24
Morningstar Advisor - Summer 2007 - 25
Morningstar Advisor - Summer 2007 - 26
Morningstar Advisor - Summer 2007 - 27
Morningstar Advisor - Summer 2007 - 28
Morningstar Advisor - Summer 2007 - Hands On: Finding the Suitable Fund Share Class for Your Client
Morningstar Advisor - Summer 2007 - 30
Morningstar Advisor - Summer 2007 - 31
Morningstar Advisor - Summer 2007 - 32
Morningstar Advisor - Summer 2007 - 33
Morningstar Advisor - Summer 2007 - Fund Style Can Drift Off Course
Morningstar Advisor - Summer 2007 - 35
Morningstar Advisor - Summer 2007 - 36
Morningstar Advisor - Summer 2007 - Sticking to Their Style, Through Thick and Thin
Morningstar Advisor - Summer 2007 - 38
Morningstar Advisor - Summer 2007 - 39
Morningstar Advisor - Summer 2007 - 40
Morningstar Advisor - Summer 2007 - 41
Morningstar Advisor - Summer 2007 - 42
Morningstar Advisor - Summer 2007 - Marathon Man
Morningstar Advisor - Summer 2007 - 44
Morningstar Advisor - Summer 2007 - 45
Morningstar Advisor - Summer 2007 - 46
Morningstar Advisor - Summer 2007 - 47
Morningstar Advisor - Summer 2007 - Growth, With a Chaser
Morningstar Advisor - Summer 2007 - 49
Morningstar Advisor - Summer 2007 - 50
Morningstar Advisor - Summer 2007 - 51
Morningstar Advisor - Summer 2007 - A Menu of Ideas to Fill Five Market Baskets
Morningstar Advisor - Summer 2007 - 53
Morningstar Advisor - Summer 2007 - 54
Morningstar Advisor - Summer 2007 - 55
Morningstar Advisor - Summer 2007 - 56
Morningstar Advisor - Summer 2007 - 57
Morningstar Advisor - Summer 2007 - Funds: Finding Funds with Conviction
Morningstar Advisor - Summer 2007 - 59
Morningstar Advisor - Summer 2007 - Stocks: So You Say You Want Income?
Morningstar Advisor - Summer 2007 - 61
Morningstar Advisor - Summer 2007 - 62
Morningstar Advisor - Summer 2007 - All Eyes on China
Morningstar Advisor - Summer 2007 - 64
Morningstar Advisor - Summer 2007 - 65
Morningstar Advisor - Summer 2007 - 66
Morningstar Advisor - Summer 2007 - 67
Morningstar Advisor - Summer 2007 - Mutual Fund Analyst Picks
Morningstar Advisor - Summer 2007 - 69
Morningstar Advisor - Summer 2007 - 70
Morningstar Advisor - Summer 2007 - 71
Morningstar Advisor - Summer 2007 - Undervalued Stocks
Morningstar Advisor - Summer 2007 - 73
Morningstar Advisor - Summer 2007 - Most Popular Variable Annuities
Morningstar Advisor - Summer 2007 - 75
Morningstar Advisor - Summer 2007 - What’s New at Morningstar and on the Web
Morningstar Advisor - Summer 2007 - 77
Morningstar Advisor - Summer 2007 - 78
Morningstar Advisor - Summer 2007 - 79
Morningstar Advisor - Summer 2007 - The Advisor’s Economic Moat
Morningstar Advisor - Summer 2007 - Cover3
Morningstar Advisor - Summer 2007 - Cover4
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