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Putting Flexibility to Good Use

Putting Flexibility to Good Use

Alec Lucas: Gold-rated American Funds Fundamental Investors puts its flexible mandate to good use. The fund strives to match rather than exceed the S&P 500's yield, which means it can own nondividend-paying growth stocks, such as top-five holding Amazon. The fund can also buy lower-yielding names whose firms have prioritized growing their payout along with their businesses, like fellow top-five holding Broadcom. The semiconductor company has increased its quarterly dividend more than tenfold since the fund bought it in 2011.

With a 35% cap on overseas exposure, the fund also has ample leeway to venture abroad. The fund's current 12% stake in non-U.S. stocks ranks in the large-blend Morningstar Category’s top decile. The fund can look out of step at times, but over a full market cycle, outperformance has been very consistent. From longest-tenured manager Dinah Perry's March 1993 start date through February 2017, the fund has beaten the S&P 500 Index in 164 out of 169 rolling 10-year periods, or 97% of the time. Skilled management and low fees breed confidence that the fund can build on its record.

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About the Author

Alec Lucas

Director of Manager Research
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Alec Lucas is director of manager research, active funds research, for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He is a voting member of the Morningstar Medalist Ratings Committee for U.S. and international fixed-income strategies, covers fixed-income strategies from asset managers such as Baird and American Funds.

Lucas is also active in parent research. He is a voting member of the U.S. parent ratings committee and previously served as the lead analyst for Franklin Templeton, Capital Group, and Vanguard, among other firms.

Lucas was a strategist on Morningstar's equity strategies team prior to assuming his current role in June 2022. He covered equity strategies from asset managers such as Primecap and American Funds and received the 2019 Citywire Professional Buyer Rising Star Award.

Before joining Morningstar in 2013, Lucas worked as a minister as well as a professor for Loyola University Chicago, among other institutions. From 2010 to 2011, he was a Fulbright Scholar at the University of Heidelberg.

Lucas holds bachelor's degrees in philosophy and classics from the University of Missouri-Columbia, where he graduated summa cum laude and with departmental honors, and a Master of Divinity, summa cum laude, from Trinity International University. He also holds a doctorate in theology, with distinction, from Loyola University Chicago and has published several articles and one book within that field.

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