Five offerings deemed to be right for right now.
This article originally appeared in the October/November 2013 issue of MorningstarAdvisor magazine. To subscribe, please call 1-800-384-4000.
Stock: Cloud Peak Energy
Fair Value Estimate: $27
Morningstar Rating: 5 Stars
Economic Moat: Narrow
Forward P/E: 10.7
Market Cap: $933.8 million
Cloud Peak is the third-largest coal miner in the United States. It is the lowest-cost player in the lowest-cost coal mining region in the world: the Powder River Basin. We think the region’s coal prices will increase from current levels over the next few years because its coal is a much more cost-effective option than natural gas for generating electricity.
Cloud Peak runs its coal mining operations by forward selling the bulk of its future coal production for the upcoming year or two, which helps it to maintain just enough workers and equipment to meet its contracted output. We believe Cloud Peak enjoys a narrow economic moat, due primarily to its established position in the Powder River Basin.
Mutual Fund: American Century Value
Category: Large Value
Morningstar Rating: 4 Stars
Morningstar Analyst Rating: Silver
Minimum Investment: $2,500
Total Assets: $2.9 billion
If the stock market is as overheated as it looks, this mild-mannered large-value fund should hold up well in a correction. Lead skipper Phillip Davidson, who’s been at the helm since the fund’s 1993 inception, likes stocks that appear cheap, but he also demands they be leaders within industries with high barriers to entry. He and his team are also quick to sell holdings that begin to look pricey. This approach has led to fine absolute and risk-adjusted returns.
Separate Account: Artisan Global Opportunity Trust
Category: World Stock
Investment Style: Large Growth
Morningstar Rating: —
Total Number of Holdings: 54
Annual Turnover: 22%
Management Fee: 0.85%
Although this separate account was just launched in 2012, an identically run mutual fund (Artisan Global Opportunities