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Looking at Our Fund Analyst Picks by Fund Company

An examination of 11 years of our picks reveals a surprising performance by Fidelity and more.

Russel Kinnel, 07/25/2011

On Morningstar.com's new  Fund Analyst Picks page, you can see how each of our picks have performed. But I took a look at how our picks have done by fund company. Looking over the past 11 years, I grouped funds by company to see how well each firm fared.

Specifically, I looked at whether each pick had outperformed the median fund in its category during the time in which it was a pick. If a fund changed categories while it was a pick, then I calculated two separate time-period performances. I'll also let you know about some of our biggest hits and misses from each company. The data is as through May 2011.

American Funds
Our American Funds picks outperformed 73% of the time. As you might expect from well-run but widely diversified funds, most produced returns that were not that far off the middle of the category. Four did produce top-quartile returns in the time they were picks: American Funds EuroPacific Growth AEPGX, American Funds Growth Fund of America AGTHX, American Funds Income Fund of America AMECX, and American Funds New Perspective ANWPX. Although performance has been middling of late, these funds show how well they can do over the long haul. Only one pick finished in the bottom quartile, and that was American Funds New World NEWFX. That fund is a mix of developed- and emerging-markets stocks, and its conservative mix has held it back versus its purely emerging-markets peers.

I was surprised to see Fidelity top the list, with 83% of our picks beating their median peer. You're probably surprised, too, as funds like Fidelity Magellan FMAGX and Fidelity Growth & Income FGRIX have been poor performers even as funds such as Fidelity Contrafund FCNTX and Fidelity Low-Priced Stock FLPSX continued to click. The key is that we largely avoided Fidelity's stock funds with our picks. Rather, we've focused on bond funds with a heavy emphasis on munis. With the unpleasant exception of one-time pick Fidelity Ultra-short Bond FUSFX, Fidelity's bond funds have been wonderfully dependable vehicles.

Over the years, eight different Fidelity muni funds have been picks at one time or another and all produced above-median percentile rankings. We've had 11 taxable-bond picks, and two have lagged.

Including the Harbor bond funds that PIMCO subadvises, PIMCO fund picks outperformed 74% of the time. The two blots on the record were PIMCO Emerging Markets Bond PEMDX and PIMCO Foreign Bond (U.S. Dollar-Hedged) PFODX. The latter was mostly a victim of a falling dollar. On the plus side, the likes of Harbor Bond HABDX and PIMCO Foreign Bond (Unhedged) PFBDX have done well for investors.

T. Rowe Price
A total of 79% of our T. Rowe Price picks have outperformed. Some our best picks were sector funds like T. Rowe Price Media & Telecommunications PRMTX and T. Rowe Price Health Sciences PRHSX. Only one fund among our picks had bottom-quartile returns while it was a pick--a testament to T. Rowe's steady nature. That fund, T. Rowe Price Value TRVLX, was a pick from July 1999 to December 1999, so at least its stay was short.

Our Vanguard picks also won 79% of the time. Many of the laggards did so because they are positioned more conservatively than are their peers. I'd say our worst pick was one that would have been much better off if it had been positioned conservatively. Vanguard Growth Equity VGEQX was a pick for nearly eight years, and its heavy dose of momentum proved dreadful for a value-driven decade.

Fortunately, some of our best picks were also in large growth in the form of the now-closed Vanguard Primecap VPMCX and Vanguard Primecap Core VPCCX, which thumped peers. Vanguard Capital Opportunity VHCOX was also a pick from the beginning of our picks list in 1999. Most of our Vanguard index fund picks have fared well, with successes like Vanguard Total International Stock Index VTIAX.


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