Morningstar Advisor - Winter 2008 - 73

Dreman Large Cap Value $22K 19 16 S&P 500 Deutsche Bank DB $30K 25 20 15 MSCI EAFE TR 03 04 05 06 07 03 04 05 06 07 S After years of frustrating results, Deutsche Bank DB is on the path to respectability. It has broken free from Germany's suspicion of profitable companies and has begun delivering solid returns. Explicit profitability goals, with management's compensation tied to achieving them, are the biggest drivers behind this metamorphosis, and this time we think the turnaround is sustainable. We view Deutsche Bank as primarily an investment bank, a German retail bank, a transaction bank, and asset-management unit. We also think that recent moves have made the firm's German retail banking a bit more appealing than they had been previously. The bank downsized German lending operations until profitability Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 improved, and then acquired Berliner Bank and Jan-03 International Norisbank,Sep-04Apr-05Nov-05 Aug-06 Apr-07Nov-07 Jan-04 Jan-05 Jan-06 Jan-07 Jul-03 Feb-04 Oct-04 Jul-05 Feb-06 Oct-06 Jul-07 Aug-03 Sep-03 Jul-04 Feb-05 Oct-05 Jul-06 Feb-07 Oct-07 Oct-03 Nov-03 Dec-03 expanding its alreadyNov-06 Aug-07 Jan-04 Nov-04 Aug-05 Apr-06 sizable Sep-07 Mar-04 Dec-04 Sep-05 Jan-05 Mar-05 Dec-05 Sep-06 Jan-06 Mar-06 Dec-06 Jan-07 Mar-07 Dec-07 Feb-03 Oct-03 more strikingNov-05 Jul-06Feb-07 Oct-07 Mar-03Nov-03 Jul-04 Mar-05 aspects Oct-06 Jun-07 Apr-03 the Jun-04 Apr-05 Feb-06 of the Jul-07 May-03 Mar-04 Jun-03 Apr-04 Jul-03 Aug-03 Aug-04 Jun-05 Apr-06 Mar-07Nov-07 footprint in Germany. JF Sep-04 Jul-05 May-06 Apr-07 Oct-04 Aug-05 Jun-06 May-07 Sep-05 Aug-06 Oct-05 Sep-06 Sep-07 Apr-04 May-04 Aug-04 May-05 May-06 May-07 OneSep-03May-04 May-05 Mar-06Nov-06 Aug-07 of SA It’s not surprising that David Dreman is buying financials. He’s a veteran contrarian who has had long-term success diving into out-of-favor sectors to buy firms with belowmarket price multiples. So when financials first 31000 tumbled earlier 2007, Dreman plunged in. His 24000 investment team has been buying and adding to some of the hardest-hit names in the sector, 17000 such as Freddie Mac FRE, Fannie Mae FNM, and Washington Mutual WM. The moves have 10000 yet to pay off, but we’re not worried. Dreman has been early before, but he’s rarely been wrong. This separate account strategy is a fine play for those sharing Dreman’s contrarian leanings. MB the largest property developers in China. Overseas small-cap shares continue to beat larger caps, as they have since 2000, and emerging-markets stocks haven't slowed either. Whether the climb in small-cap and emergingmarkets valuations is justified is an open question. What's important for investors to recognize is that this fund has benefited from the rise of both historically volatile asset classes. KD iShares S&P Global Financials IXG and WisdomTree International Financial DRF $31K MSCI EAFE TR 24 iShares 17 03 04 05 06 07 financials rout has been its global dimension. Large European banks like Barclays BCS and 42000 34000 26000 18000 10000 Dec-03 Nov-04 Feb-04 Dec-04 Feb-05 Dec-05 Dec-06 HSBC HBC have posted multibillion-dollar write-downs; others like mortgage specialist Northern Rock have had to be bailed out and European central bankers have been forced to pump billions of euros worth of liquidity into the European financial system to keep the lending pump primed. In short, non-U.S. financial stocks have been no refuge from the carnage that's unfolded in recent months. The question is whether the punishment—a sharp pullback in the prices of financial stocks the world over—fits the crime. Judging from the fundamentals, we see signs that the market is being fearful when we ought to be bellying up to buy. With that in mind, we've set forth a few examples—a very cheap European bank, a mutual fund run by a financials-savvy manager, and a pair of attractive global-financials ETFs. Overview by Jeffrey Ptak E If it’s one-stop exposure to foreign financials you seek, these two ETFs are the most-logical choices. The iShares offering isn’t ideal; it invests roughly one third of its assets in the shares of U.S. financial firms, making it a less-than-pure play on international banks and other financials. But it’s a convenient package all the same, with assets spread across more Artisan International Small Cap ARTJX than 240 holdings, 20-plus developed and emerging markets, as well as the full breadth of $42K financials subsectors. It’s also inexpensive: Its 34 annual expense ratio is a mere 0.48%. The WisdomTree fund provides unadulterated 26 exposure to non-U.S. financials, with a twist. MSCI EAFE TR Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 WisdomTree is part of the new vanguard of Feb-03Oct-03 Jun-04Feb-05Oct-05 Jun-06Feb-07Oct-07 Mar-03Nov-03 Jul-04 Mar-05Nov-05 Jul-06 Mar-07Nov-07 Apr-03 Feb-04Oct-04 Jun-05Feb-06Oct-06 Jun-07 May-03 Apr-04 Jun-03 May-04 Jul-03 Aug-03 Sep-03 Jul-05 this fund May-07 Aug-05 Aug-06 Jul-07 Nov-06 Sep-07 04 06 03 05 07 fundamentalAug-04Apr-05 Apr-06 Apr-07Dec-07 indexers. Sep-05May-06 weights Thus, Sep-06 Aug-07 Dec-03 Sep-04May-05 Mar-06 Dec-06 Mar-04Nov-04 Dec-04 Dec-05 its holdings by the value of cash dividends paid, MF A large portion of this fund's stake in finanrather than market cap, which reflects cials comes from emerging markets—manager WisdomTree’s belief that dividend-weighted Mark Yockey sees these investments as a way portfolios confer superior returns. Though the to participate in emerging markets' developing jury is still out on that claim, the fund’s utility financial systems. One example of this is the can’t be denied, as it compiles more than 250 fund's top holding, Hong Kong Exchanges and non-U.S. financial stocks (all hailing from Clearing Ltd., which is a play on the increased developed countries) and does so at the very trading activity in Hong Kong (and the reasonable price of 0.58% per annum. Both are anticipation of even more) resulting from worthy options. (Note: There is no graph for mainland China's economic emergence; another Wisdom Tree International Financial because of example is Tian An China Investments, one of its short history.) JP K MorningstarAdvisor.com 73 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07
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Morningstar Advisor - Winter 2008

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

Morningstar Advisor - Winter 2008
Contents
Letter from the Editor
Inbox
How Do You Use the Morningstar Style Box?
Real Estate Investing Goes Global
The Golden Touch
Investment Briefs
Learning to Fly with Equity Options
Another Block in Building a Portfolio
In a League of Their Own
Unlock the Box
Fashion Change
The View from the Investment Side
Unpredictable Style
Weighting the Fundamentals
Wire-to-Wire Consistency
The Secret's Out
Focus on Financials
Strongest Homebuilders Will Withstand the Wrecking Ball
Breaking Style Conventions
Playing It Safe with Financials
Back to Bond School
Mutual Fund Analyst Picks
Undervalued Stocks
Most Popular Variable Annuities
New at Morningstar
The Style Counsel
Morningstar Advisor - Winter 2008 - Intro
Morningstar Advisor - Winter 2008 - Morningstar Advisor - Winter 2008
Morningstar Advisor - Winter 2008 - Cover2
Morningstar Advisor - Winter 2008 - 1
Morningstar Advisor - Winter 2008 - 2
Morningstar Advisor - Winter 2008 - Contents
Morningstar Advisor - Winter 2008 - 4
Morningstar Advisor - Winter 2008 - 5
Morningstar Advisor - Winter 2008 - 6
Morningstar Advisor - Winter 2008 - Letter from the Editor
Morningstar Advisor - Winter 2008 - 8
Morningstar Advisor - Winter 2008 - Inbox
Morningstar Advisor - Winter 2008 - How Do You Use the Morningstar Style Box?
Morningstar Advisor - Winter 2008 - 11
Morningstar Advisor - Winter 2008 - Real Estate Investing Goes Global
Morningstar Advisor - Winter 2008 - 13
Morningstar Advisor - Winter 2008 - 14
Morningstar Advisor - Winter 2008 - The Golden Touch
Morningstar Advisor - Winter 2008 - 16
Morningstar Advisor - Winter 2008 - 17
Morningstar Advisor - Winter 2008 - Investment Briefs
Morningstar Advisor - Winter 2008 - 19
Morningstar Advisor - Winter 2008 - 20
Morningstar Advisor - Winter 2008 - 21
Morningstar Advisor - Winter 2008 - Learning to Fly with Equity Options
Morningstar Advisor - Winter 2008 - 23
Morningstar Advisor - Winter 2008 - 24
Morningstar Advisor - Winter 2008 - 25
Morningstar Advisor - Winter 2008 - Another Block in Building a Portfolio
Morningstar Advisor - Winter 2008 - 27
Morningstar Advisor - Winter 2008 - 28
Morningstar Advisor - Winter 2008 - 29
Morningstar Advisor - Winter 2008 - In a League of Their Own
Morningstar Advisor - Winter 2008 - 31
Morningstar Advisor - Winter 2008 - 32
Morningstar Advisor - Winter 2008 - 33
Morningstar Advisor - Winter 2008 - 34
Morningstar Advisor - Winter 2008 - 35
Morningstar Advisor - Winter 2008 - Unlock the Box
Morningstar Advisor - Winter 2008 - 37
Morningstar Advisor - Winter 2008 - 38
Morningstar Advisor - Winter 2008 - 39
Morningstar Advisor - Winter 2008 - Fashion Change
Morningstar Advisor - Winter 2008 - 41
Morningstar Advisor - Winter 2008 - 42
Morningstar Advisor - Winter 2008 - 43
Morningstar Advisor - Winter 2008 - The View from the Investment Side
Morningstar Advisor - Winter 2008 - 45
Morningstar Advisor - Winter 2008 - 46
Morningstar Advisor - Winter 2008 - 47
Morningstar Advisor - Winter 2008 - 48
Morningstar Advisor - Winter 2008 - 49
Morningstar Advisor - Winter 2008 - 50
Morningstar Advisor - Winter 2008 - 51
Morningstar Advisor - Winter 2008 - Unpredictable Style
Morningstar Advisor - Winter 2008 - 53
Morningstar Advisor - Winter 2008 - Weighting the Fundamentals
Morningstar Advisor - Winter 2008 - 55
Morningstar Advisor - Winter 2008 - 56
Morningstar Advisor - Winter 2008 - 57
Morningstar Advisor - Winter 2008 - 58
Morningstar Advisor - Winter 2008 - 59
Morningstar Advisor - Winter 2008 - 60
Morningstar Advisor - Winter 2008 - 61
Morningstar Advisor - Winter 2008 - Wire-to-Wire Consistency
Morningstar Advisor - Winter 2008 - 63
Morningstar Advisor - Winter 2008 - 64
Morningstar Advisor - Winter 2008 - 65
Morningstar Advisor - Winter 2008 - The Secret's Out
Morningstar Advisor - Winter 2008 - 67
Morningstar Advisor - Winter 2008 - 68
Morningstar Advisor - Winter 2008 - 69
Morningstar Advisor - Winter 2008 - Focus on Financials
Morningstar Advisor - Winter 2008 - 71
Morningstar Advisor - Winter 2008 - 72
Morningstar Advisor - Winter 2008 - 73
Morningstar Advisor - Winter 2008 - Strongest Homebuilders Will Withstand the Wrecking Ball
Morningstar Advisor - Winter 2008 - 75
Morningstar Advisor - Winter 2008 - Breaking Style Conventions
Morningstar Advisor - Winter 2008 - 77
Morningstar Advisor - Winter 2008 - Playing It Safe with Financials
Morningstar Advisor - Winter 2008 - 79
Morningstar Advisor - Winter 2008 - 80
Morningstar Advisor - Winter 2008 - Back to Bond School
Morningstar Advisor - Winter 2008 - 82
Morningstar Advisor - Winter 2008 - Mutual Fund Analyst Picks
Morningstar Advisor - Winter 2008 - 84
Morningstar Advisor - Winter 2008 - 85
Morningstar Advisor - Winter 2008 - 86
Morningstar Advisor - Winter 2008 - 87
Morningstar Advisor - Winter 2008 - Undervalued Stocks
Morningstar Advisor - Winter 2008 - 89
Morningstar Advisor - Winter 2008 - 90
Morningstar Advisor - Winter 2008 - 91
Morningstar Advisor - Winter 2008 - Most Popular Variable Annuities
Morningstar Advisor - Winter 2008 - 93
Morningstar Advisor - Winter 2008 - New at Morningstar
Morningstar Advisor - Winter 2008 - 95
Morningstar Advisor - Winter 2008 - The Style Counsel
Morningstar Advisor - Winter 2008 - Cover3
Morningstar Advisor - Winter 2008 - Cover4
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