Use this screen to find broad portfolios that have outperformed their peers.
This article originally appeared in the February/March 2013 issue of MorningstarAdvisor magazine. To subscribe, please call 1-800-384-4000.
If you regularly read articles written by Morningstar’s experts, you’ve no doubt read discussions of the importance of diversification in managing portfolios. Holding too many assets in one particular area of the market can have disastrous effects, especially if your client’s asset allocation is not in sync with his or her capacity for risk.
When it comes to stock mutual funds, however, some investors might assume that concentrated is better. Some of the fund world’s biggest stars—from Bill Nygren of Oakmark OAKMX to Bruce Berkowitz of Fairholme FAIRX—have managed notably concentrated portfolios. Moreover, investors might view concentration as a sign of truly active management, whereas sprawling portfolios with hundreds of stocks might have difficulty distinguishing their performance from that of a broad market benchmark.
Morningstar Category = Domestic Stock
And Special Criteria does not = Index Funds
And Total Number of Holdings >= 250
And Morningstar Rating >= 4 Stars
First, we’ll screen for domestic-stock funds with at least 250 holdings and Morningstar ratings of 4 or 5 stars. We screened out index funds so as to include only actively managed funds.
And Morningstar Analyst Rating >= Bronze
Next, we want to stick with funds rated Bronze or better by Morningstar’s fund analyst team to ensure that fund managers have been vetted.
And Total Assets $MM >= 500
And Special Criterial = Distinct portfolios only