Morningstar Advisor - February/March 2011 - (Page 24)

Investments à la Carte Four Picks for the Present Mutual Fund: Meridian Value MVALX Category Investment Style Expense Ratio Total Assets Minimum Investment Yield 5 Mid Blend Asset Allocation Cash US Stock Non US Stock Bond Other 8 Mid Growth 1.09% $933.8 million $1,000 0.27% –100 –50 0 50 100 “Prudent” best describes this fund. Rick Aster and his team buy firms that have had a few bad quarters but where they see a catalyst for improvement. The managers avoid distressed firms in favor of fundamentally sound operations with near-term issues. The fund’s stake in paint supplier Sherwin Williams SHW is typical. The managers bought it in early 2009 after its shares plummeted. But they correctly deduced that it would benefit from a rise in remodeling. This fund nearly keeps pace with racier rivals in up markets but loses much less in downdrafts. Net result: a strong long-term risk/reward profile. Michael Breen Exchange-Traded Fund: SPDR KBW Bank KBE Price/Fair Value Avg Assets in Share Class Expense Ratio Fair Value Estimate Dividend Yield Holdings 0.88 Daily Closing Price $2.3 million 0.35% $29.93 0.51% 24 1.5 1.0 0.5 0.0 –0.5 –1.0 11/05 11/06 11/07 11/08 11/09 11/10 The financials sector is attractive on a price/ fair-value basis, and we think the strong economic news of late bodes well for banks in particular. Unemployment claims are at their lowest level since before the Lehman collapse, retail sales and durable goods orders have exceeded expectations, and commercial and industrial loans outstanding at banks have stopped declining. This fund offers pure exposure to 24 large, money-center banks. It uses a market-weighting approach, which results in large holdings of J.P. Morgan Chase JPM, Citigroup C, Bank of America BAC and Wells Fargo WFC, all of which have 4-star Morningstar Ratings. Michael Rawson Separate Account: Diamond Hill Large Cap Equity Category Investment Style Total Assets 1.0 Price/Earnings 0.5 0.0 Assets in Top 10 Holdings Turnover Ratio 1 Large Value Asset Allocation Cash US Stock Non US Stock Bond Other 4 Large Blend $3.2 billion 13.3 33.45% 43% –100 –50 0 50 100 This separate account has an eye for quality. The managers don’t shy away from stocks -0.5 Manager Chuck Bath and his team focus on with near-term issues as long as their long-term strong, established businesses with-1.0Jan-06Sep-06May-07Jan-08Sep-08May-09Jan-10Sep-10 portfolio’s barriersJul-06Mar-07Nov-07Jul-08Mar-09Nov-09Jul-10 Nov-05 Aug-06Apr-07Dec-07 remain solid.Feb-10ofDec-10 Dec-05 to Dec-06prospects Oct-08Jun-09 Mar-10 the Feb-06Oct-06Jun-07Feb-08 Nov-08Jul-09 Four Oct-10 Mar-06 Jan-07Sep-07 Jun-08Feb-09Oct-09Jun-10 Apr-06 Feb-07Oct-07 Aug-08Apr-09Dec-09 Nov-10 May-06 Jun-06 Nov-06Jul-07 Mar-08 Dec-08 Sep-09 Aug-10 Aug-07Apr-08 Jan-09 May-08 Aug-09Apr-10 May-10 entry. They like a bargain but will pay up for top five holdings are from the energy sector, proven businesses, so the portfolio’s value including Anadarko Petroleum APC and Apache APA. The team added steadily to both measures, such as its price/earnings ratio, are throughout 2010 as their shares tumbled in a bit above the large-value category average. the aftermath of the gulf oil spill. Both names But, so are all of its profitability metrics, have rebounded sharply. Michael Breen reflecting the separate account’s quality bias. 24 Morningstar Advisor February/March 2011

Table of Contents for the Digital Edition of Morningstar Advisor - February/March 2011

Morningstar Advisor - February/March 2011
Letter From the Editor
First, Do No Harm
Do You Use Active or Passive Investment Strategies?
Best of Both Worlds
How to Build an Index
Accountable Investor
Nice Guys Finish First
Four Picks for the Present
Investment Briefs
A New Guardrail Against Risk
Tech Loosens the Purse Strings (a Bit)
It’s More About Costs Than Active or Passive
Play Your Stars
In Between Active and Passive
Selling Beta as Alpha
The Weighting Game, and Other Puzzles of Indexing
Leaving the Nest
Redefining Credit Risk
Another Vote for Market-Based Credit-Risk Measures
Big Opportunities in Small-Cap Stocks
Benchmarks? What Benchmarks?
Mutual Fund Analyst Picks
50 Most Popular ETFs
Undervalued Stocks With Wide Moats
VA Sales Slide, but Assets on the Rise
Indexing’s Lunatic Fringe

Morningstar Advisor - February/March 2011