Morningstar Advisor - June/July 2013 - (Page 18)

Investments à la Carte Five Picks for the Present Stock: Capital One Financial COF Fair Value Estimate $74 Morningstar Rating Uncertainty High QQQQ 2012 Stock Price Compared With Fair Value Estimate Fair value estimate Daily stock price $80K (Gaps indicate when fair value estimate was under review.) 60 05/12 08/12 11/12 02/13 Economic Moat Narrow Capital One has evolved from a monoline credit card company to a diversified holding company offering a broad spectrum of financial products and services to consumers and businesses. As a result of bold acquisitions into traditional and nontraditional banking spaces, Capital One has become the seventh-largest bank by deposits in the United States. Capital One can be generally Forward P/E 8.5 Market Cap $34.4 billion divided into three segments: credit cards, consumer banking, and commercial banking. It has an astounding 74 million customer accounts. While the company is well-known for its credit-card segment, we think Capital One’s expansion into other consumer and commercial banking businesses will be the primary growth catalyst in the nearer term. Dan Werner 1/30/13 Mutual Fund: T. Rowe Price Capital Appreciation PRWCX Category 4 Large Blend 80 Morningstar Rating Morningstar Analyst Rating QQQQQ Fair Value - Daily Daily Closing Price Asset Allocation Cash 60 Expenses 0.71% US Stock Non US Stock Bond 40 5/1/126/19/128/10/1210/3/1211/29/121/25/133/20/13 5/2/126/20/128/13/1210/4/1211/30/121/28/133/21/13 5/3/126/21/128/14/1210/10/1212/11/122/1/133/22/13 5/4/126/22/128/15/1210/11/1212/12/122/4/133/25/13 5/10/12 7/2/128/20/1210/16/1212/17/122/12/134/2/13 5/7/126/25/128/16/1210/12/1212/13/122/5/133/26/13 5/11/12 7/3/128/21/1210/17/1212/18/122/13/134/3/13 5/8/126/26/128/17/1210/15/1212/14/122/11/134/1/13 5/14/12 7/4/128/22/1210/18/1212/19/122/14/134/4/13 5/9/126/27/12 8/23/1210/19/1212/20/122/15/134/10/13 5/15/127/10/128/31/1210/29/1212/28/122/25/134/18/13 5/16/127/5/128/24/1210/22/1212/21/122/18/134/11/13 5/17/127/11/12 9/3/1210/25/1212/26/122/21/134/16/13 5/18/127/6/128/27/1210/23/1212/24/122/19/134/12/13 5/21/127/12/12 9/4/1210/26/1212/27/122/22/134/17/13 5/22/127/13/12 9/10/1211/1/1212/31/122/26/134/19/13 5/23/127/16/12 9/5/1210/30/12 1/1/132/20/134/15/13 5/24/127/17/129/11/1211/2/12 1/2/13 2/27/134/22/13 5/25/127/18/129/6/1210/31/12 1/3/13 2/28/134/23/13 5/28/127/19/129/12/1211/5/12 1/4/13 3/1/13 4/24/13 5/29/127/20/129/7/12 11/6/12 1/10/13 3/4/13 4/25/13 5/30/127/23/129/13/1211/12/121/7/13 3/5/13 4/26/13 5/31/127/24/129/14/1211/7/12 1/11/13 3/11/13 6/1/12 7/25/129/17/1211/13/121/8/13 3/6/13 4/29/13 6/4/12 7/26/129/18/1211/14/121/14/13 3/12/13 6/5/12 7/27/129/19/1211/15/121/9/13 3/7/13 4/30/13 6/11/12 8/1/129/20/1211/16/121/15/13 3/13/13 6/6/12 7/30/129/21/1211/19/121/16/13 3/8/13 6/12/12 8/2/12 9/24/1211/20/121/17/133/14/13 6/7/12 7/31/129/25/1211/21/121/18/133/15/13 6/13/12 8/3/12 9/26/1211/22/121/21/133/18/13 6/8/12 8/6/12 9/27/12Other 12/25/12 3/19/13 6/14/12 8/7/12 9/28/1211/26/121/22/13 3/27/13 6/15/12 8/8/12 10/1/1211/27/121/23/13 3/28/13 6/18/12 8/9/12 10/2/1211/28/121/24/13 3/29/13 6/28/12 8/28/1210/24/12 6/29/12 8/29/12 11/8/12 7/9/12 8/30/12 11/9/12 1/29/13 4/5/13 10/5/12 12/3/12 1/30/13 4/8/13 10/8/12 12/4/12 1/31/13 4/9/13 10/9/12 12/10/12 2/6/13 11/23/12 2/7/13 12/5/12 2/8/13 12/6/12 12/7/12 2/7/13 –100 –50 0 50 100 1/30/13 1/24/13 1/24/13 2/25/13 This broadly diversified fund does a lot of things right. David Giroux oversees a portfolio with an equity weighting of 50% to 70%, where he focuses on undervalued blue chips. The rest of the fund is composed of a mix of traditional bonds, leveraged loans, convertible bonds, and cash; he’ll also write covered Minimum Investment $2,500 Total Assets $15.2 billion call options for additional income. Deft security selection has led the equity, bond, and converts sleeves to each outperform their respective benchmarks during his nearly seven-year tenure, and returns have been remarkably consistent versus the fund’s moderate allocation peers. Greg Carlson Separate Account: Bridgeway Blue Chip 35 Index Category 4 Large Blend Investment Style 4 Large Blend Morningstar Rating QQQ Asset Allocation Cash US Stock Non US Stock Bond Other –100 –50 0 50 18 Morningstar Advisor June/July 2013 100 Minimum Investment $5 million This concentrated fund homes in on the market’s behemoths, but it does so in a sensible way. The fund tracks an in-house index composed of the 35 largest U.S. companies by market capitalization—except it won’t own more than four firms from the same sector, so it must reach further down the market-cap ladder for constituents. The fund further diversifies by weighting its holdings equally rather Number of Holdings 37 Total Assets $407 million than by market cap. The index is typically reconstituted every few years (except when high market volatility results in big market-cap changes) to keep trading costs down. This construction method, paired with the fund’s cheap 0.15% expense ratio, has led to fine risk-adjusted returns. Greg Carlson 80 60 40 5/1/126/17 5/2/126/2 5/3/126/2 5/4/126/2 5/10/127 5/7/126/7 5/11/12 5/8/12 6/ 5/14/12 5/9/12 5/15/12 5/16/12 5/17/12 5/18/12 5/21/12 5/22/12 5/23/12 5/24/12 5/25/1 5/28/1 5/29/1 5/30/1 5/31/1 6/1/1 6/4/1 6/5/1 6/11 6/6/1 6/12 6/7/ 6/13 6/8/ 6/14 6/15 6/18

Table of Contents for the Digital Edition of Morningstar Advisor - June/July 2013

Morningstar Advisor - June/July 2013
Contents
Contributors
Letter From the Editor
Not Your Values
How Do You Use Alternatives for Clients?
Working to Build a Niche
How to Put Buffett’s Investing Philosophy into Practice
Sophisticated Strategies for the Masses
Investments á la Carte
Investment Briefs
The Percentile Trap
Defense Firms Will Stay Aloft
Beware the Lure of Diversification
Using Alternatives in Practice
Managed Futures and Cash Rates
The World Is Getting Grayer
Waiting to Pull Up Anchor
The Price of Managing Volatility
Let’s Get Back to Basics
Our Favorite Mutual Funds
50 Most-Popular Equity ETFs
Undervalued Stocks With Wide Moats
Mutual Fund Urban Myths

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