Morningstar Advisor - December 2012/January 2013 - (Page 22)

Investment Briefs Funds Earn New Analyst Ratings Morningstar’s fund analysts continue to add funds to their Morningstar Analyst Ratings list and revisit existing ratings on funds. Below is a look at a couple of re-ratings and ratings issued for the first time. FPA Capital FPPTX New Rating: We are initiating a Silver rating of this fund. Although Bob Rodriguez has dialed back his contributions, the fund still has good managers and a sound strategy. Dennis Bryan and Rikard Ekstrand run a focused portfolio with a big slug of cash just like Rodriguez did. They remain risk-averse investors who look for cheap companies with healthy balance sheets. Of late, they have been big fans of energy. Predicting Apple’s Crash In the August/September 2012 issue, James X. Xiong, a senior research consultant with Morningstar Investment Management, explored the log-periodic power law model and how it can identify asset-price bubbles and predict their crash. He used the model to predict the end of the art-market bubble in China (“The Chinese Art Market and the Origin of Bubbles”). On Sept. 24, Xiong put Apple APPL through his LPPL model. The results are exhibited in the chart. Share Price of Apple Versus the Price Prediction of the LPPL Model $ Apple LPPL (predicted on 9/24/2012) Apple (after prediction) 800 700 600 500 400 300 200 100 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 On Sept. 24, Xiong predicted Apple’s share price was close to its crash point. On Nov. 7, Apple was 21% off its peak. Scout International UMBWX New Rating: We have lowered our rating to Silver because of concerns about succession. James Moffett is a brilliant manager who has produced excellent results here since 1993. However, he is now near 70, and we have to be prepared for the possibility that he could retire in the next few years. Although he added two comanagers in 2011 and 2012, there isn’t anyone with the experience or track record to give us sufficient confidence to keep the fund rated Gold. If you are buying it today for the next decade, you are betting on Moffett’s successors as much as on him, and that takes you into some big unknowns. Artio International Equity BJBIX Artio International Equity II JETAX New Rating: We have lowered these two funds to Bronze from Silver. The funds are enduring their fourth-straight year of poor performance as managers Rudolph-Riad Younes and Richard Pell’s macro forecasts are still misfiring. The four poor years follow quickly on the heels of seven straight brilliant years ended in 2007. While their country-selection skills worked well before the financial crisis, they have struggled as central bankers and debt crises made for a very different world. PIMCO Foreign Bond (Unhedged) PFBDX PIMCO Foreign Bond (USD-Hedged) PFODX New Rating: We are starting these funds with a Silver rating. Scott Mather has proved adept at moving among countries and between corporate and government debt since taking the helm in February 2008. He’s managed to limit the damage caused by Europe’s problems, and in the unhedged version, he’s shown skill with currency management. As a result, the funds have been steady performers. What you choose really depends on your needs. Hedged is less volatile, but you lose out on currency diversification. If you think you already have enough foreign-currency exposure through your foreign equity funds or elsewhere, then hedged may be the way to go. Russel Kinnel 22 Morningstar Advisor December/January 2013

Table of Contents for the Digital Edition of Morningstar Advisor - December 2012/January 2013

Morningstar Advisor - December2012/January 2013
Letter From the Editor
What Stands Between Me and Stupid
Why Do You Use Dynamic Funds of Funds?
Serving Clients and Community
How to Pick an ETF Managed Portfolio Strategy
Tactical View of Risk
Investments á la Carte
Investment Briefs
Unbundling ETF Managed Portfolios
Risks Loom Over Telecom Industry
Outsourcing Asset Allocation
ETF Managed Portfolios on the Rise
Age-Based Options Take Over 529 Industry
How the Landscape for Advisors Is Changing
Mark Egan Embraces Volatility
Alpha, Beta, and Now … Gamma
Performance Gaps
Gains in Momentum
Companies Where Management Teams Add Value
Our Favorite Mutual Funds
50 Most-Popular Equity ETFs
Undervalued Stocks With Wide Moats
The Once and Future King

Morningstar Advisor - December 2012/January 2013