Mutual Funds We're Buying
A look at recent portfolio moves by Morningstar analysts.
A look at recent portfolio moves by Morningstar analysts.
If you're a longtime follower of Morningstar research, you're probably familiar with some of our favorite mutual funds. Not only do we occasionally publish the list of fund choices in Morningstar's own 401(k) plan, but our Fund Analyst Picks list represents the most comprehensive collection of our best ideas.
Still, Morningstar fund analysts do tend to have very strong individual opinions, and from time to time it's interesting to take a peek at what they're buying and selling. As such, I recently polled our fund analyst staff to see what moves they've been making lately in their own portfolios.
First, it's worth pointing out that given the buy-and-hold mentality that permeates our investing approach, most analysts were making moves on the margins only. In most cases, new purchases were made to augment a portfolio. And they generally were consistent with what we've been telling you lately. Indeed, analysts were generally increasing exposure to large-cap funds--with an emphasis on growth in particular, cutting back on small-cap and real estate funds, and continuing to maintain or increase exposure to overseas funds. And there was even some interest in convertible funds.
Of course, there are always exceptions, and you can count analyst Dieter Bardy among those who think that the small-cap rally isn't over. Unlike many others on Morningstar's fund analyst staff, Bardy has let his investment in American Beacon Small Cap Value (AVFIX) continue to run because he isn't yet compelled by arguments that small caps are poised to slow. That said, Bardy--who is one of our real estate experts--has cut his exposure to that segment of the market, a move that's consistent with those made by other analysts.
Meanwhile, analyst Greg Carlson isn't letting his small-cap exposure run, but he has made some changes to its composition. Carlson has begun to trim his stake in Fidelity Low-Priced Stock (FLPSX), figuring that he wants more dedicated small-cap exposure. As such, he has initiated positions in Masters' Select Smaller Companies and Bridgeway Ultra-Small Company Market (BRSIX). Carlson is also further boosting his international exposure and plans to add Harbor International Growth (HAIGX) to his portfolio.
Analyst Todd Trubey also picked up Masters' Select Small at the expense of T. Rowe Price Small-Cap Stock (OTCFX). Trubey thinks the fund's smaller size will work in its favor. He has also sold Harbor Capital Appreciation (HACAX) and replaced it with Marsico Focus (MFOCX), which he likes as a counterbalance to his focused large-cap value exposure. That said, several other analysts continue to favor the Harbor fund as a way to get exposure to large-cap growth stocks.
Meanwhile, senior analyst Dan Culloton has significantly increased his stake in Vanguard Health Care (VGHCX). Ever the contrarian, Culloton likes adding to a fund that is focused on an unloved area of the market. Culloton particularly likes the fund's exposure to large-cap pharmaceutical stocks, which have been showing up in value-fund portfolios lately. He also adds that the fund is cheaper than any health-care ETF.
Getting a little more unorthodox are analysts Gareth Lyons and Andy Gogerty. Lyons recently purchased Northern Income Equity (NOIEX) for his daughter Sadie, betting that convertibles were due to bounce back. (Incidentally, at 55% of assets, Lyons' total nondollar exposure is among the highest in the group.) Gogerty went a different direction, putting money in T. Rowe Price Emerging Markets Bond (PREMX). He sees the fund as a way to diversify a portfolio that is heavily tilted towards domestic stocks, and to gain exposure to emerging markets without all the risks that accompany an investment in emerging-markets stocks.
Finally, I recently invested in T. Rowe Price Global Stock (PRGSX). My portfolio is slanted toward the value end of the spectrum, so I've recently been on the hunt for a growth offering. However, I wanted to be sure to avoid a manager who chases growth with no regard for valuations. So, I got very interested in this formerly middling fund when manager Robert Gensler took over a few months ago. I like the idea of investing with a talented manager who has a small asset base to start with, and the support of an organization that is serious about improving its international research.
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