Morningstar Advisor - Fall 2008 - 56

Undiscovered Managers Kevin O’Boyle Scores of consumer-oriented companies also meet his initial screens, but because he worries that reduced access to credit markets will hurt sales of pricier durable goods, he’s avoided names such as Home Depot HD and CarMax KMX. More controversially, he’s devoted a small slice of the portfolio to precious metals as insurance against a falling U.S. dollar. “The financial system is broken,” O’Boyle says, “and the means by which it will be repaired are likely to be inflationary” as the Fed attempts to prop up ailing institutions by injecting the economy with more cash. Thanks to Presidio’s svelte asset base, a key distinction from his peers is that O’Boyle enjoys much more flexibility to invest in small names. He benefited from such freedom for much of his time at Meridian Value, but a torrent of new money flooded the fund in 2001, leaving him hamstrung. (Assets grew from $285 million at the end of 2000 to $1.1 billion a year later.) O’Boyle invests across the market-capitalization spectrum at Presidio, but the fund’s size allows him to easily invest in small- and micro-cap stocks, which fueled his best years at Meridian Value. Opportunity Knocks Presidio Fund PRSDX $16K 1990s) and another assists him with administrative duties. But Presidio is largely a one-man show. While still doing some administrative duties himself, O’Boyle says that he spends more than 85% of his time researching stocks. And he’s the only one doing the research. (O’Boyle hired an analyst in early 2007, but he left at the end of the year for personal reasons). O’Boyle didn’t have any analysts during most of his tenure at Meridian, either. A bigger challenge could come from growth. Presidio hasn’t been inundated with assets, but that could change if performance remains strong. When Meridian Value swelled with new assets in 2001, O’Boyle struggled to put the money to work. Because the stock market was tanking in 2001, having a lot of cash didn’t hurt, but O’Boyle might not be so lucky next time around. O’Boyle says that he won’t hesitate to take action if money started coming in too quickly—something Meridian failed to do. As models, he cites Longleaf Partners and First Pacific Advisors— two extremely shareholder-friendly shops that have closed funds to new investments over the years. Presidio still has a lot to prove if it wants to be included in the same elite rank as those two firms. Still, with talented, proven management, Presidio is one of the small-cap world’s bright lights. K Christopher Davis is a mutual fund analyst with Morningstar. He is editor of Morningstar’s Fidelity Fund Family Report, a monthly newsletter that offers independent guidance on the fund family and helps investors find the best Fidelity funds. 14 12 S&P 500 05 06 07 08 Category 6 Small Blend Morningstar Rating Expense Ratio (%) 1.50 3-Yr Anl Total Rtn (%) 4.19 3-Yr Anl TR % Rank Cat 9 QQQQQ Minimum Investment $10,000 Data as of Sept. 30, 2008. Jun-05 Jun-06 Jun-07 Jun-08 Jul-05Oct-05 Feb-06 Jul-06Oct-06 Feb-07 Jul-07Oct-07 Feb-08 Jul-08 Aug-05 Dec-05 Sep-05 Jan-06 Nov-05 Aug-06 Dec-06 Apr-07 Aug-07 Dec-07 Apr-08 Aug-08 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Nov-06 Mar-07 Nov-07 Mar-08 Apr-06 May-06 Mar-06 If there’s a time when investors should expect Presidio to struggle, O’Boyle says that this is it. With few earnings improvement stories to come by, he finds recessionary environments the toughest time to run his strategy. Yet his fund has held up much better than its rivals in the most recent downturn, just as Meridian Value did in the 2000-2002 bear market. The tough times also have given O’Boyle more buying opportunities. Nearly a thousand names now populate his list of companies that have disappointed at least three quarters in a row, a couple hundred more than usual. To be sure, investing with a tiny operation like Presidio comes with unique risks. O’Boyle hired one person to handle trading (he worked at Meridian in the late 1980s and early 56 Morningstar Advisor Fall 2008

Morningstar Advisor - Fall 2008

Table of Contents for the Digital Edition of Morningstar Advisor - Fall 2008

Morningstar Advisor - Fall 2008
Contents
New on MorningstarAdvisor.com
Letter from the Editor
Contributors
Inbox
Are You Preparing for Higher Taxes?
State of Financials
Oracles of Alabama
Investment Briefs
Managers’ Investment Secrets Revealed
Conformity Becomes a Growing Concern at American
Gimme Shelter
Location, Location, Location
Rooted in Buffett, Going for Growth
Keeping Little Company
Away from the Numbers
Consumer Confidence
What about Natural Gas?
TIPS to Beat Back Inflation
Investing in Hidden Assets
Funds That Have an Edge Come Tax Time
Mutual Fund Analyst Picks
50 Most Popular Equity ETFs
Undervalued Stocks
Most Popular Variable Annuities
New at Morningstar
One for You, 19 for Me
Morningstar Advisor - Fall 2008 - Intro
Morningstar Advisor - Fall 2008 - Morningstar Advisor - Fall 2008
Morningstar Advisor - Fall 2008 - Cover2
Morningstar Advisor - Fall 2008 - 1
Morningstar Advisor - Fall 2008 - 2
Morningstar Advisor - Fall 2008 - Contents
Morningstar Advisor - Fall 2008 - 4
Morningstar Advisor - Fall 2008 - 5
Morningstar Advisor - Fall 2008 - New on MorningstarAdvisor.com
Morningstar Advisor - Fall 2008 - 7
Morningstar Advisor - Fall 2008 - 8
Morningstar Advisor - Fall 2008 - Letter from the Editor
Morningstar Advisor - Fall 2008 - Contributors
Morningstar Advisor - Fall 2008 - Inbox
Morningstar Advisor - Fall 2008 - Are You Preparing for Higher Taxes?
Morningstar Advisor - Fall 2008 - 13
Morningstar Advisor - Fall 2008 - State of Financials
Morningstar Advisor - Fall 2008 - 15
Morningstar Advisor - Fall 2008 - 16
Morningstar Advisor - Fall 2008 - Oracles of Alabama
Morningstar Advisor - Fall 2008 - 18
Morningstar Advisor - Fall 2008 - 19
Morningstar Advisor - Fall 2008 - 20
Morningstar Advisor - Fall 2008 - Investment Briefs
Morningstar Advisor - Fall 2008 - 22
Morningstar Advisor - Fall 2008 - 23
Morningstar Advisor - Fall 2008 - 24
Morningstar Advisor - Fall 2008 - 25
Morningstar Advisor - Fall 2008 - Managers’ Investment Secrets Revealed
Morningstar Advisor - Fall 2008 - 27
Morningstar Advisor - Fall 2008 - 28
Morningstar Advisor - Fall 2008 - 29
Morningstar Advisor - Fall 2008 - Conformity Becomes a Growing Concern at American
Morningstar Advisor - Fall 2008 - 31
Morningstar Advisor - Fall 2008 - 32
Morningstar Advisor - Fall 2008 - 33
Morningstar Advisor - Fall 2008 - 34
Morningstar Advisor - Fall 2008 - 35
Morningstar Advisor - Fall 2008 - Gimme Shelter
Morningstar Advisor - Fall 2008 - 37
Morningstar Advisor - Fall 2008 - 38
Morningstar Advisor - Fall 2008 - 39
Morningstar Advisor - Fall 2008 - Location, Location, Location
Morningstar Advisor - Fall 2008 - 41
Morningstar Advisor - Fall 2008 - 42
Morningstar Advisor - Fall 2008 - 43
Morningstar Advisor - Fall 2008 - 44
Morningstar Advisor - Fall 2008 - Rooted in Buffett, Going for Growth
Morningstar Advisor - Fall 2008 - 46
Morningstar Advisor - Fall 2008 - 47
Morningstar Advisor - Fall 2008 - 48
Morningstar Advisor - Fall 2008 - 49
Morningstar Advisor - Fall 2008 - 50
Morningstar Advisor - Fall 2008 - 51
Morningstar Advisor - Fall 2008 - 52
Morningstar Advisor - Fall 2008 - 53
Morningstar Advisor - Fall 2008 - Keeping Little Company
Morningstar Advisor - Fall 2008 - 55
Morningstar Advisor - Fall 2008 - 56
Morningstar Advisor - Fall 2008 - 57
Morningstar Advisor - Fall 2008 - Away from the Numbers
Morningstar Advisor - Fall 2008 - 59
Morningstar Advisor - Fall 2008 - 60
Morningstar Advisor - Fall 2008 - 61
Morningstar Advisor - Fall 2008 - Consumer Confidence
Morningstar Advisor - Fall 2008 - 63
Morningstar Advisor - Fall 2008 - 64
Morningstar Advisor - Fall 2008 - 65
Morningstar Advisor - Fall 2008 - 66
Morningstar Advisor - Fall 2008 - 67
Morningstar Advisor - Fall 2008 - 68
Morningstar Advisor - Fall 2008 - What about Natural Gas?
Morningstar Advisor - Fall 2008 - 70
Morningstar Advisor - Fall 2008 - 71
Morningstar Advisor - Fall 2008 - 72
Morningstar Advisor - Fall 2008 - TIPS to Beat Back Inflation
Morningstar Advisor - Fall 2008 - 74
Morningstar Advisor - Fall 2008 - 75
Morningstar Advisor - Fall 2008 - Investing in Hidden Assets
Morningstar Advisor - Fall 2008 - 77
Morningstar Advisor - Fall 2008 - Funds That Have an Edge Come Tax Time
Morningstar Advisor - Fall 2008 - 79
Morningstar Advisor - Fall 2008 - 80
Morningstar Advisor - Fall 2008 - 81
Morningstar Advisor - Fall 2008 - Mutual Fund Analyst Picks
Morningstar Advisor - Fall 2008 - 83
Morningstar Advisor - Fall 2008 - 84
Morningstar Advisor - Fall 2008 - 85
Morningstar Advisor - Fall 2008 - 50 Most Popular Equity ETFs
Morningstar Advisor - Fall 2008 - 87
Morningstar Advisor - Fall 2008 - Undervalued Stocks
Morningstar Advisor - Fall 2008 - 89
Morningstar Advisor - Fall 2008 - 90
Morningstar Advisor - Fall 2008 - 91
Morningstar Advisor - Fall 2008 - Most Popular Variable Annuities
Morningstar Advisor - Fall 2008 - 93
Morningstar Advisor - Fall 2008 - 94
Morningstar Advisor - Fall 2008 - New at Morningstar
Morningstar Advisor - Fall 2008 - One for You, 19 for Me
Morningstar Advisor - Fall 2008 - Cover3
Morningstar Advisor - Fall 2008 - Cover4
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