International Growth & Income holds promise.
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American Funds is doing something quite out of character: It's bringing out a new stock fund. International Growth & Income, which is slated to launch in October 2008, will be the first all-equity offering from American since New World
Taken at face value, International Growth & Income's mandate to invest primarily in companies outside the United States doesn't appear to be an especially contrarian one at this point: Foreign stocks outperformed their U.S. counterparts for several years prior to 2008, thanks in large part to the decline of the U.S. dollar against most major currencies. However, this fund will focus primarily on larger, financially healthy companies that pay dividends, which haven't looked so hot for much of that span compared with leveraged, economically sensitive firms (although debt-heavy companies have struggled over the past year). What's more, the managers of American's existing equity funds that own dividend-payers have told me they're finding many more attractively valued dividend-paying firms outside of the U.S. than within it; this fund gives American an opportunity to focus more purely on them. American has long preferred financially healthy firms in the first place--it's difficult to find a fund in its lineup that owns much in the way of deeply troubled companies or speculative highfliers that have yet to generate profits--but here we'd expect a higher yield. Consider that world-stock offering Capital World Growth & Income
Plenty of Potential
As with most of American's funds, this one looks to be fundamentally sound from a variety of angles. Its three managers (who will each run separate chunks of the fund) all boast significant experience: Each has worked for the shop for at least 15 years, each has run a portion of an American fund for at least nine years, two of the three have picked stocks for at least one fund that invests heavily overseas, and two of the three have worked on a fund with income as part of its mandate (Income Fund of America
The new fund is also a good fit within American's fund lineup. There's currently just one pure foreign-stock fund, EuroPacific Growth
Greg Carlson is an analyst with Morningstar.
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