Morningstar Advisor - December 2010/January 2011 - (Page 16)

Investments à la Carte Four Picks for the Present Mutual Fund: PRIMECAP Odyssey Stock POSKX Category 7 Large Growth Asset Allocation Cash US Stock Non US Stock Bond Other Investment Style 4 Large Blend Morningstar Rating QQQQ Stewardship Grade Z Total Assets $623.4 million Expense Ratio 0.80% –100 –50 0 50 100 This fund has great bloodlines. It is run by the same Primecap team that has generated outstanding long-term records at a number of funds it subadvises, including Vanguard Primecap VPMCX. The managers use a patient, contrarian-growth strategy and load up on firms whose long-term prospects are being overshadowed by near-term concerns. Right now, that’s health-care stocks. The team has stashed more than one fourth of the funds’ assets in the sector because it thinks the market is underestimating the potential for innovation at such top-10 holdings as biotech firm Amgen AMGN, medical device-maker Medtronic MDT, and pharmaceutical firms Eli Lilly LLY and Roche. Michael Breen Exchange-Traded Fund: Vanguard S&P 500 ETF VOO Expense Ratio 0.06% Daily Closing Price Price/Fair Value 0.90 Avg Assets in Share Class $120 million Avg Assets in Fund $97 billion Avg Trading Volume $4 million Assets With Wide Moats 42% $56 54 52 9/1/10 10/1/10 Daily closing price 11/1/10 Vanguard has finally brought the granddaddy of index funds to the ETF structure with the launch of Vanguard S&P 500 ETF VOO. Vanguard has an incredible amount of experience running index funds with tax efficiency and at extremely low tracking errors. We think that this fund will be no different. As a new ETF, it is much smaller than its rivals, but it still trades competitively, because it benefits from being a separate share class of the Vanguard 500 mutual funds. What this means is that ETF shareholders benefit from economies of scale of the mutual fund, but it also means that the tax advantages of the ETF structure are shared with the mutual fund shareholders. Michael Rawson Separate Account: Fiduciary Management of Milwaukee Large Cap Equity Category 4 Large Blend Asset Allocation Cash US Stock Non US Stock Bond Other Investment Style 4 Large Blend Debt/Capital 30.3 Assets in Top 10 holdings 45.19% Turnover 40% % in Cash 3.86 –100 –50 0 50 100 This separate account proves the old saw that quality never goes out of style. Its portfolio is a who’s who of dominant firms, capped by top holding Berkshire Hathaway BRK.A. Nearly all of its 30 holdings have earned an economic moat from Morningstar’s equity analysts, and nearly half of them have wide moats— sustainable competitive advantages that give them an enduring edge over rivals. The portfolio’s profitability measures are in line with the S&P 500’s, but it has much lower debt levels. This quality bias means the separate account has lagged the market in its mostbuoyant periods but has held up much better in rough patches. Expect more of the same. Michael Breen 16 Morningstar Advisor December/January 2011

Table of Contents for the Digital Edition of Morningstar Advisor - December 2010/January 2011

Morningstar Advisor - December 2010/january 2011
New on
Letter From the Editor
What Strategies Do You Use to Help Retirees Hedge Against Longevity Risk?
Investment Briefs
Four Picks for the Present
Scaring the Swiss
Tech Is the Apple of Managers’ Eyes
How to Read an Sec Filing
A Strategy That Loves Performance Chasers
Things Fall Apart, Even in Industrials
A Future in Questions, Not Answers
Research Over Chocolates
Creating Portfolios That Confront Retirement’s Risks
Building in-Retirement Portfolios to Last
On the Lookout for Guaranteed Income Streams
What Fires Up Mairs & Power
All Aboard!
Aiming at Alternatives
Stuff Your Stocking with Out-of-Favor Bargains
Stable, High Yields (No Bonds Included)
Mutural Fund Analyst Picks
50 Most Popular ETFs
Undervalued Stocks with Wide Moats
Twelve Bee, Huh?

Morningstar Advisor - December 2010/January 2011