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October/November 2013 Picks

Five offerings deemed to be right for right now.

Morningstar Analysts, 10/22/2013

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 CLD
Fair Value Estimate: $27
Morningstar Rating: 5 Stars
Uncertainty: High
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.
Elizabeth Collins

Mutual Fund: American Century Value TWVLX
Category: Large Value
Morningstar Rating: 4 Stars
Morningstar Analyst Rating: Silver
Expenses: 1.00%
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.
Greg Carlson

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 ARTRX) boasts an excellent record since its September 2008 inception, and the team at the helm has generated superb results at other Artisan funds since 1997. Lead skipper James Hamel, who joined the team in 1997 as an analyst, and the rest of this veteran crew build a compact 40- to 50-stock portfolio of companies with healthy balance sheets that they believe are capable of strong, sustainable growth. The team’s other charges, Artisan Mid Cap ARTMX and Artisan Small Cap ATSX, are closed to new investors, but they manage a modest $2 billion in this strategy.
Greg Carlson


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