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Mid-Value Funds All Over the Map

Most of Morningstar's top Medalists are shining in a pack of broad returns.

Russel Kinnel, 07/27/2015

There's a wide dispersion among mid-value funds these days. The range of returns for the 12 months through June 30, 2015, spans an 11.6% gain to a 19.0% loss. Funds that favor utilities, energy, and other commodities are hurting a bit, while those favoring health-care, tech, and consumer stocks are feeling fine. Go out to three years and annualized returns look cheerier, though the range is still quite wide, going from near-zero to a high 34% annual gain, on average.

The group is worth a look because the best stock-pickers make it their home.

Diamond Hill Small-Mid Cap DHMAX 
This fund has a Morningstar Analyst Rating of Gold and a top-quintile three-year return. The fund has avoided the dismal basic-materials sector while finding a wide variety of winners in health-care, consumer, and financials industries. Manage­ment takes a straightforward approach to value, but it clearly won't be fooled by value traps. The fund has strong five-year numbers, and come December it should have pretty strong 10-year numbers, too.

Vanguard Selected Value VASVX 
Now that the fund has three subadvisors, this Gold-rated offering's sector weightings don't really stand out from the category. Deep-value firm Pzena was added last year to join Barrow, Hanley, Mewhinney & Strauss and Donald Smith & Co. The fund is still distinctive with stock selection. Names like Hanesbrands HBIRoyal Caribbean Cruises RCL, and Micron Technology MU have proved to be big winners. The fund is up a nifty 19% for the trailing three years, and its five-year return is just outside the top third.

T. Rowe Price Mid-Cap Value TRMCX 

David Wallack has shown that he's a thoughtful value investor who won't follow the crowd. He has actually dialed up exposure to beaten-down basic-materials stocks in recent years, and he's remained shy of the hot tech sector. That's been a handicap in the short run, but stock selection has largely overcome that challenge. Names like Hospira HSP and E*Trade Financial ETFC have been winners. The Gold-rated fund is closed to new investors.

American Century Mid Cap Value ACMVX  
This closed fund has a stellar long-term record, but its three-year returns are right at the Morningstar Category average. That's actually decent for a fund focused on the downside. Its caution is designed to pare losses in a bear market, and it has. It has a 10-year upside capture ratio of 98 and a downside capture ratio of 87. This means the Silver-rated fund keeps pace in rallies but outperforms in down markets.

Fidelity Low-Priced Stock FLPSX 
Joel Tillinghast's three-year returns are middling, but he's got strong results over longer time periods. Tillinghast manages to make a giant portfolio work over the long haul. Relative to peers, he has quite a bit more in consumer cyclical names and tech stocks. He has much less than peers in utilities and real estate. The fund earns a Silver rating.

Russel Kinnel is Morningstar's director of mutual fund research. He is also the editor of Morningstar FundInvestor, a monthly newsletter dedicated to helping investors pick great mutual funds, build winning portfolios, and monitor their funds for greater gains. (Click here for a free issue). Mr. Kinnel would like to hear from readers, but no financial-planning questions, please. Follow Russel on Twitter: @russkinnel.

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