Morningstar Advisor - Winter 2008 - 77

stick with more-tenured skippers. and Manager Tenure > 5 Finally, we want to clear out some of extras and focus in on one share class and diversified domestic funds only. The current Morningstar breakpoint for microcaps is approximately $600 million, so we centered our search on funds with an average market cap below that. And because it’s tough and costly to trade illiquid micro-cap stocks, we kicked high-turnover funds out of the mix. Pick: Vanguard Interm.-Term Investment Grade Average Market Cap and Turnover Ratio , , 600 100 and and or Oldest Share Class 5 ( Global Category Global Category 5 5 Yes US Equity Large Cap ) US Equity Mid/Small Cap ) Pick: Third Avenue Value TAVFX Several micro-cap funds are closed, so we limited the results to domestic funds that are open to new investors and dismissed multiple share classes of the same fund. and and and US Broad Asset Class Closed To New Investors Oldest Share Class US Stock No Yes VFICX This fund’s main advantage should come as no surprise: Low fees. It typically treads lightly in the mortgage sector and government bonds because of its corporate-leaning benchmark. The fund is no stranger to the top of the category in terms of performance. We’d attribute a large part of its stellar long-term showing to its bargain-basement 0.21% expense ratio. Lower fee hurdles enable bond managers to deliver competitive returns with less risk. Scouting Out Ultrashort Municipal Bond Funds This fund’s longtime veteran manager, Marty Whitman, can buy any type of issue anywhere in the world as long as it fits within his “safe and cheap” parameters. Aside from U.S. stock holdings, the fund is willing to own foreign stocks, bonds, and cash. Distressed debt has been a particular highlight for shareholders here. Few, if any, fund managers have exhibited success like Whitman has. That said, distressed-debt situations have been few and far between lately. Whitman says that’s because corporations have been healthy and credit spreads have been low. Uncovering Micro-Cap Portfolios 5 5 5 Morningstar’s short-term municipal bond category is home to funds with durations of less than 4.5 years. Though we don’t have a category for ultrashort municipal funds, it’s fairly easy to take our current classification one step further and focus on funds with ultrashort durations. Though strategies that focus on micro-cap stocks seem to be niche approaches, many have proven to have staying power. We’ve seen compelling research on the merit of investing in the smallest companies out there, which is further supported by the strong risk-adjusted results of micro-cap funds over the years. Yet we also caution about the risks that come with them. Liquidity is very tight in the micro-cap stock universe, so mutual funds can get caught holding the bag if trading dries up and prices swing wildly. It’s also worth noting that microcap stocks have been on a tear in recent years, so it might be better to place them on a watch list rather than dive deep into a rally. Funds with more of a micro-cap focus can get lost in Morningstar’s small-cap categories. Here’s how you can find them in our database: Pick: Perritt Micro Cap Opportunities PRCGX This mutual fund brings a well-reasoned approach and good execution to the micro-cap landscape. Manager Michael Corbett quickly weeds out firms that are unprofitable or bogged down by debt. He and his team of analysts then jump into the financial statements to better understand each business and try to estimate its worth. They keep a long-term time horizon and like to trade against the grain. Digging for Corporate-Focused Funds Within the Intermediate-Term Bond Category Morningstar Category and Avg Eff Duration 5 70 MorningstarAdvisor.com 77
http://MorningstarAdvisor.com

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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