Morningstar Advisor - Spring 2008 - 71

Westwood Equity WESWX, which manager Susan Byrne has run since its 1987 inception. That fund has one of the best track records in the large-cap value category, largely as a result of Byrne’s value-orientated contrarian style. This fund should perform better, though, because its fees are currently one third lower than its GAMCO counterpart, leaving more return for shareholders. Byrne’s avoidance of the subprime mess and focus on firms with international diversification has helped her amid fears of a slowdown in the United States; her savvy tech moves are also typical of her mix of long-term sector trend analysis and bottom-up research. Walgreen WAG $19K S&P 500 16 $19K 16 S&P 500 13 03 04 05 06 07 08 36000 13 29000 04 05 06 07 03 22000 08 15000 A consistent approach in building larger, 8000 free-standing stores on convenient, high-traffic corners since the early 1990s has given Walgreen the best collection of real estate in the drugstore industry and has enabled the firm to prosper. The store statistics bear out the firm’s success at finding the best corners. We estimate that a Walgreen store, on average, fills about 275 prescriptions per store per day, compared with fewer than 200 for the average Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 drugstore chain. More productive stores Feb-03Oct-03better Feb-05Oct-05Jun-06Feb-07Oct-07 Mar-03 Feb-04Oct-04Jun-05Feb-06Oct-06Jun-07Feb-08 Apr-03 toMay-04 earnings per store,Mar-07 free May-03 Jun-03 Jul-03 Jun-04 Apr-05 Apr-06 Apr-07 Aug-03 Jul-04 May-05 May-06 May-07 Sep-03 Aug-04 Jul-05 Nov-03 Sep-04 Aug-05 Jul-06 Sep-05 Aug-06 Jul-07 Sep-06 Aug-07 Sep-07 Nov-07 equate Apr-04 Mar-05 Mar-06 robust Dec-03 Nov-04 Nov-05 Nov-06 Mar-04 Dec-04 Dec-05 Dec-06 Dec-07 cash flow, and the highest returns on invested capital of any drugstore chain. And given that prescriptions have constant demand, we expect Walgreen to weather any potential economic weakness quite well. S in the aggregate. Where are the bargains? Pretty much everywhere you look in the portfolio. For example, not a single one of the Dow’s 30 components was trading at a premium to our fair value estimate as of March 3, and two in three names were at least 10% undervalued. Though the Dow is relatively concentrated when compared with moresprawling large-cap indexes, such as the S&P 500 and Russell 1000, we don’t think Diamonds is an especially risky investment. Most of its holdings, such as United Technologies UTX, Merck MRK, and Walt Disney & Co. DIS, are industry bulwarks that are unlikely to be dislodged by competitors anytime soon. All Jan-03Sep-03 Jun-04Feb-05Oct-05Jun-06Feb-07Oct-07 Feb-03Oct-03 Jul-04 Mar-05 Dec-05 Sep-06 Jun-07Feb-08 Mar-03 Dec-03 Sep-04 Jun-05Feb-06Oct-06 Jul-07 Apr-03 Jan-04 Oct-04 Jul-05 Mar-06 Dec-06 Sep-07 May-03 Feb-04 Nov-04 Aug-05 May-06Jan-07 Nov-07 Jun-03 Mar-04 Dec-04 Sep-05 Jul-06 Mar-07 Dec-07 Jul-03 Apr-04 Jan-05 Nov-05 Aug-06 May-07Jan-08 Aug-03 May-04 May-05 Apr-06 Apr-07 told, Nov-03 Aug-04Apr-05 Jan-06 Nov-06 Aug-07 the fund invests nearly 75% of assets in the stocks of wide-moat firms. That, coupled with the fund’s reasonably wide diversification across industries, should confer stability. No, the fund is hardly loss-proof. But it looks like an awfully tempting value at these levels, even taking that risk into account. market continued to languish, and markets around the globe sank. In fact, most have shed more than the S&P 500 for the year to date through March 31, 2008. Predicting macroeconomic shifts is tough. That’s why we’re big fans of individual security selection over top-down market calls. Below are a handful of international securities we think will excel over the long haul regardless of macroeconomic machinations. Overview by Michael Breen Boeing BA $36K 29 22 S&P 500 03 04 05 06 07 08 Diamonds Trust DIA This old standby, which tracks the Dow Jones Industrial Average, is chock-full of cheap, high-quality stocks. As of early March, the portfolio was trading at an 18% discount to what our analysts think its holdings are worth E International It had become an article of faith in some circles that receding U.S. economic hegemony and the rise of China and other emerging markets had greatly reduced the world’s dependence on its largest economy. The theory held that rising domestic consumption and global trade meant a plunge in the United States would have little impact on global equities. And when the U. S. stock market was first tripped up by the subprime-debt debacle, overseas stocks indeed held up. But the U.S. Boeing is truly a global company that along with European rival Airbus supplies the world with commercial jets. Boeing’s dominant market position coupled with strong global airline traffic growth, the liberalization of air travel between countries, and replacement demand for more fuel-efficient jets should help it capture a majority of worldwide commercial aircraft demand during the next five years. The ultraefficient new 787 Dreamliner should lead the way. But Boeing is more than just commercial jets, as it has balanced this Jan-03 Jan-04 business with a Jan-05 Jan-06 defense unit countercyclical Jan-07 Jan-08 that benefitsSep-04May-05 Apr-06 to use from the Sep-05 Jun-06 May-07 unique ability Aug-07 Feb-03Oct-03Jun-04Feb-05 Nov-05Jul-06 Mar-07 Feb-08 Mar-03 Feb-04Oct-04Jun-05Feb-06Oct-06Jun-07 Apr-03 Mar-04 Mar-05 Mar-06 Feb-07Oct-07 May-03 Apr-04 Apr-05 Jun-03 May-04 Jul-03 Aug-03 Jul-04 Sep-03 Aug-04 Jul-05 May-06 Apr-07 Nov-03 Aug-05 Aug-06 Jul-07 Sep-06 Sep-07 Nov-07 commercial technologyOct-05 Nov-06 Dec-07 Dec-03 Nov-04 in military applications. Dec-04 Dec-05 Dec-06 And although the defense unit will shrink as a portion of sales in coming years because of commercial unit’s growth, the value it provides to smoothing out Boeing’s airplane business remains firmly intact, further minimizing the downside to potential shareholders. S MorningstarAdvisor.com 71
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Morningstar Advisor - Spring 2008

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

Morningstar Advisor - Spring 2008
Contents
Letter from the Editor
Inbox
Do You Use Annuities with Living Benefit Guarantees?
Managers Who Actively Enrich Shareholders
Staying Out of the Silos
Investment Briefs
Let’s Not All Become Fundamental Indexers Just Yet
Volatility Potential
Adding the Income Dimension
Do’s and Don’ts of RMDs
An Attractive Yield is Only Skin Deep
Mutual Funds Get in the Game
Beyond Target Date
The Last Holdout
A Bird of a Different Feather
First-Class Thinker
Sleep Like a Baby
Is Health Care Immune to a Recession?
Anatomy of a Mutual Fund Disaster
Embrace Your Inner Contrarian
Risks Worth Taking
Mutual Fund Analyst Picks
Undervalued Stocks
Most Popular Variable Annuities
New at Morningstar and on MorningstarAdvisor.com
Back to the Garden
Morningstar Advisor - Spring 2008 - Intro
Morningstar Advisor - Spring 2008 - Morningstar Advisor - Spring 2008
Morningstar Advisor - Spring 2008 - Cover2
Morningstar Advisor - Spring 2008 - 1
Morningstar Advisor - Spring 2008 - 2
Morningstar Advisor - Spring 2008 - Contents
Morningstar Advisor - Spring 2008 - 4
Morningstar Advisor - Spring 2008 - 5
Morningstar Advisor - Spring 2008 - 6
Morningstar Advisor - Spring 2008 - Letter from the Editor
Morningstar Advisor - Spring 2008 - 8
Morningstar Advisor - Spring 2008 - Inbox
Morningstar Advisor - Spring 2008 - Do You Use Annuities with Living Benefit Guarantees?
Morningstar Advisor - Spring 2008 - 11
Morningstar Advisor - Spring 2008 - Managers Who Actively Enrich Shareholders
Morningstar Advisor - Spring 2008 - 13
Morningstar Advisor - Spring 2008 - 14
Morningstar Advisor - Spring 2008 - Staying Out of the Silos
Morningstar Advisor - Spring 2008 - 16
Morningstar Advisor - Spring 2008 - 17
Morningstar Advisor - Spring 2008 - Investment Briefs
Morningstar Advisor - Spring 2008 - 19
Morningstar Advisor - Spring 2008 - 20
Morningstar Advisor - Spring 2008 - 21
Morningstar Advisor - Spring 2008 - Let’s Not All Become Fundamental Indexers Just Yet
Morningstar Advisor - Spring 2008 - 23
Morningstar Advisor - Spring 2008 - 24
Morningstar Advisor - Spring 2008 - 25
Morningstar Advisor - Spring 2008 - Volatility Potential
Morningstar Advisor - Spring 2008 - 27
Morningstar Advisor - Spring 2008 - 28
Morningstar Advisor - Spring 2008 - 29
Morningstar Advisor - Spring 2008 - 30
Morningstar Advisor - Spring 2008 - 31
Morningstar Advisor - Spring 2008 - Adding the Income Dimension
Morningstar Advisor - Spring 2008 - 33
Morningstar Advisor - Spring 2008 - 34
Morningstar Advisor - Spring 2008 - 35
Morningstar Advisor - Spring 2008 - Do’s and Don’ts of RMDs
Morningstar Advisor - Spring 2008 - 37
Morningstar Advisor - Spring 2008 - 38
Morningstar Advisor - Spring 2008 - 39
Morningstar Advisor - Spring 2008 - An Attractive Yield is Only Skin Deep
Morningstar Advisor - Spring 2008 - 41
Morningstar Advisor - Spring 2008 - Mutual Funds Get in the Game
Morningstar Advisor - Spring 2008 - 43
Morningstar Advisor - Spring 2008 - 44
Morningstar Advisor - Spring 2008 - 45
Morningstar Advisor - Spring 2008 - 46
Morningstar Advisor - Spring 2008 - Beyond Target Date
Morningstar Advisor - Spring 2008 - 48
Morningstar Advisor - Spring 2008 - 49
Morningstar Advisor - Spring 2008 - 50
Morningstar Advisor - Spring 2008 - 51
Morningstar Advisor - Spring 2008 - 52
Morningstar Advisor - Spring 2008 - The Last Holdout
Morningstar Advisor - Spring 2008 - 54
Morningstar Advisor - Spring 2008 - 55
Morningstar Advisor - Spring 2008 - 56
Morningstar Advisor - Spring 2008 - 57
Morningstar Advisor - Spring 2008 - 58
Morningstar Advisor - Spring 2008 - 59
Morningstar Advisor - Spring 2008 - A Bird of a Different Feather
Morningstar Advisor - Spring 2008 - 61
Morningstar Advisor - Spring 2008 - 62
Morningstar Advisor - Spring 2008 - 63
Morningstar Advisor - Spring 2008 - First-Class Thinker
Morningstar Advisor - Spring 2008 - 65
Morningstar Advisor - Spring 2008 - 66
Morningstar Advisor - Spring 2008 - 67
Morningstar Advisor - Spring 2008 - Sleep Like a Baby
Morningstar Advisor - Spring 2008 - 69
Morningstar Advisor - Spring 2008 - 70
Morningstar Advisor - Spring 2008 - 71
Morningstar Advisor - Spring 2008 - 72
Morningstar Advisor - Spring 2008 - 73
Morningstar Advisor - Spring 2008 - Is Health Care Immune to a Recession?
Morningstar Advisor - Spring 2008 - 75
Morningstar Advisor - Spring 2008 - Anatomy of a Mutual Fund Disaster
Morningstar Advisor - Spring 2008 - 77
Morningstar Advisor - Spring 2008 - Embrace Your Inner Contrarian
Morningstar Advisor - Spring 2008 - 79
Morningstar Advisor - Spring 2008 - Risks Worth Taking
Morningstar Advisor - Spring 2008 - 81
Morningstar Advisor - Spring 2008 - 82
Morningstar Advisor - Spring 2008 - Mutual Fund Analyst Picks
Morningstar Advisor - Spring 2008 - 84
Morningstar Advisor - Spring 2008 - 85
Morningstar Advisor - Spring 2008 - 86
Morningstar Advisor - Spring 2008 - 87
Morningstar Advisor - Spring 2008 - 88
Morningstar Advisor - Spring 2008 - Undervalued Stocks
Morningstar Advisor - Spring 2008 - 90
Morningstar Advisor - Spring 2008 - 91
Morningstar Advisor - Spring 2008 - Most Popular Variable Annuities
Morningstar Advisor - Spring 2008 - 93
Morningstar Advisor - Spring 2008 - 94
Morningstar Advisor - Spring 2008 - New at Morningstar and on MorningstarAdvisor.com
Morningstar Advisor - Spring 2008 - Back to the Garden
Morningstar Advisor - Spring 2008 - Cover3
Morningstar Advisor - Spring 2008 - Cover4
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