Four offerings deemed to be right for right now.
This article originally appeared in the June/July 2012 issue of MorningstarAdvisor magazine. To subscribe, please call 1-800-384-4000.
After a few years of investing in research and
development, bolstering its salesforce, and pruning its product lineup, Covidien has returned to
prominence in the medical-device
arena. The company’s strong product pipeline, a management team dedicated to maximizing returns on
investment, and favorable secular trends bode well for its prospects. The company established a
strong moat around its business,
particularly in devices, and represents a
compelling long-term investment opportunity. Covidien built its device business on its
technological know-how and distribution network, which resulted in leadership positions across most
of its product categories. As
long as the company doesn’t fall too far behind in its technology, it is essentially assured a
steady market share and growth.
Mutual Fund: Janus Triton
Category: Small Growth
Investment Style: Small Growth
Morningstar Rating: 5 Stars
Morningstar Analyst Rating: Silver
Total Assets: $3 billion
This small-growth fund has been on a roll lately. In the past, that might have been a red flag for a Janus fund, but this one has become a success by focusing on sturdy companies rather than taking big risks. Managers Chad Meade and Brian Schaub started their careers at Janus during the firm’s brutal performance in the 2000–02 bear market. As a result, they stick with companies that possess sustainable competitive advantages and trade at undemanding valuations. The fund has excelled during their six-year tenure, shining in both rallies and choppy markets. A modest 0.93% expense ratio seals its appeal.
Separate Account: Invesco Large Cap Value
Category: Large Value
Investment Style: Large Value
Total Number of Holdings: 72
Morningstar Rating: 3 Stars
Total Assets: $15.5 billion
This account has changed names since Invesco
acquired Van Kampen in 2010, but it’s been
run by the same management team for a long
time. Lead skipper Kevin Holt, for example, has
been a manager on the team since 1999.
The managers have steered the mutual fund
Invesco Van Kampen Comstock ACSTX to solid
long-term returns using a deep-value,
low-turnover strategy that prizes low valuations
and turnaround stories. While this portfolio
can have a cyclical bent at times, the managers
have kept it out of deep trouble by limiting
stock-specific risk and making prudent calls,
such as avoiding most big banks going into the
financial crisis of 2008.
Exchange-Traded Fund: iShares MSCI Singapore Index
Morningstar Category: Pacific/Asia ex-Japan Stock
Expense Ratio: 0.52%
AUM: $1.5 billion
12-Month Yield: 3.6%
3-Year Standard Deviation: 27.1%
Average Daily Volume: 1.8 million
Broad emerging-markets funds have exposure
to risky areas such as Russia and India,
but investors can use regional funds
to customize an emerging-markets allocation.
We think iShares MSCI Singapore Index EWS
is an attractive option for exposure to
fast-growing Southeast Asia, as well as
China. Most of the companies in this fund have
regional operations but are domiciled in
Singapore, a country with an established rule of
law. Relative to a broad emerging-markets
fund, EWS has been just as volatile, but less
correlated to the S&P 500. About 45% of EWS’
portfolio is composed of financial firms,
including banks and real estate companies.
The growth outlook for both sectors
in Southeast Asia is robust. One near-term risk,
however, is that many of these real estate firms
have assets in China, where the government is
trying to cool the property market. On the
domestic front, the Singapore economy
is healthy, which should be supportive of both
equities and the Singapore dollar. This
fund does not hedge its foreign-currency
exposure, so it will benefit when the Singapore
dollar appreciates against the greenback.
Hindsight: April/May 2012
Our picks from a year ago performed well for the most part. Stock pick Visa V was a home run, soaring 61.6% over the period because of strong revenue and earnings growth. Mutual fund pick Artisan Value ARTLX handily beat its Russell 1000 Value benchmark thanks to savvy technology picks such as Apple AAPL, and its management team won the award for Morningstar Domestic-Stock Fund Manager of the Year for 2011. Separate account Dodge & Cox Balanced edged its typical moderate-allocation peer because of an emphasis on large firms and a bigger-than-average equity stake. Meanwhile, the trend-following models of exchange-traded fund pick Cambria Global Tactical GTAAX struggled in a choppy market.