Morningstar Advisor - August/September 2009 - 23

market-cap-weighted average price/fair-value ratio rose from 0.65 in the first quarter to 0.88 currently, while the simple median price/fairvalue ratio rose from 0.77 to 0.92. (Companies with a price/fair-value ratio of less than 1.0 are undervalued; those with a ratio more than 1.0 are overvalued.) Price/Fair-Value Ratios by Moat Rating wide-moat category looks significantly more attractive than elsewhere in Morningstar’s coverage universe. Morningstar’s Wide Moat Focus Index fell less than broader market averages from a 2007 peak into the March 2009 low, and it has since risen more than market averages. This index is an equal-weighted index focused on some of Morningstar’s favorite wide-moat companies, and it has outperformed wide-moat companies as a group in recent months. comparison to the S&P 500, which is up more than 5% for the year. Not all government-bond funds are struggling. Morningstar analyst Katie Rushkewicz says that some funds that have seen a reversal of fortune. Leading the pack are intermediateterm funds Putnam U.S. Government Income PGSIX and Putnam American Government Income PAGVX. Both funds tanked in 2008 because of nongovernment exposure and an aggressive approach that included leverage, but they’re up 12.75% and 9.04%, respectively, for the year to date through June 10. Several short-term government-bond funds have held their own, including Wells Fargo Advantage Short Duration Government Bond MNSGX and Sit U.S. Government Securities SNGVX, which have gains of 4.04% and 3.59%, respectively. Predictably, most long-dated government funds have gotten trounced. PIMCO Real Return Asset PRAIX is the lone long-term fund in the black, up 2.81% so far in 2009. March 09 June 09 None Narrow Wide Overall Morningstar data 0.80 0.74 0.68 0.77 1.01 0.87 0.79 0.92 Five Still-Solid Government-Bond Funds Government-bond funds have taken it on the chin this year as the recent market rally has brought back investors’ appetite for risk. Longterm government-bond funds, a notoriously volatile bunch, are down more than 19% for the year to date through June 10. Intermediateterm government-bond funds have fared better, losing just 0.32%, while short-term funds have eked out a 0.63% gain. Those returns pale in While the market as a whole may look close to fairly valued, Morningstar’s analysts still see opportunities, particularly among wide-moat firms. The median price/fair-value ratio for the MAKE NO MISTAKE. IF I SAY I’VE GOT IT, YOU CAN COUNT ON IT. I may seem like just a mild-mannered ﬁnancial guy. But when you call for help, you’ll see the powers that I can bring to you. Answers in the blink of an eye, tackle the most complicated problems, even protect what matters to you most – the relationship you have with your clients. Together, we could make a pretty dynamic duo. I’m Bryan Cook. And I am On Your Side. See how we can be On Your Side: 800-321-6064 or nationwide.com/solutions ® © 2009 Nationwide Financial Services, Inc. All rights reserved. NFV-0622AO MorningstarAdvisor.com 23 RINT DOTTED LINE OR BELOW 6/25/09 1:09:15 PM

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Morningstar Advisor - August/September 2009

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