Three Great New Fund Analyst Picks

While examining the funds on our coverage list, our analysts are always searching for gems that can be deemed worthy of our Fund Analyst Picks list. We cover more than 2,000 funds, but we winnow that list down to about 150 for the picks list. We’re looking for funds that boast strong fundamentals in areas such as costs, management, strategy, and long-term risk-adjusted performance.

If you’re in the market for a fund, check out three of our latest additions to the list. (For the whole list, click  here.) All three are from well-known and well-respected fund companies, yet these offerings haven’t attracted much attention. So, you can be the first on your block to own one of these cool funds. (You talk about funds with your neighbors, don’t you?)

 Dodge & Cox International Stock (DODFX)
This is a relatively new fund from a venerable firm. We don’t often choose 2-year-old funds as Analyst Picks, but we feel quite comfortable doing so here given this fund's pedigree. Large-value stalwart  Dodge & Cox Stock (DODGX) has generally invested 5% to 10% of assets overseas, and management gave an all-foreign strategy a test run in a separate account before unleashing it in fund form. Those familiar with Dodge & Cox will notice plenty of family traits at International Stock. It’s run by a big management team, applies a conservative value-oriented strategy, and it even boasts low costs. Many other fund companies charge more for their foreign funds because they say it costs more to do research overseas. Yet this fund charges just 0.90% on a very modest asset base of just $144 million.

I also like the fact that management isn’t going down the beaten path. Management felt that much of the European markets were overpriced so they invested half there--well below the norm for such funds--and spread the rest in Asia and Latin America. They also hold an appealing mix of giants like  Sony (SNE) with small fries like Banco Latinoamericano de Exportaciones SA E (BLX).

 Fidelity Capital Appreciation (FDCAX)
Admittedly, you need Fidelity’s Brobdingnagian perpsective to consider a $3 billion fund overlooked, but that’s how this fund looks to me. After running some of Fidelity’s tech funds, Harry Lange took the helm of this wide-ranging fund in 1996. However, performance was middling in the late 1990s as the market grew from a rally to a bubble, so this fund didn’t stand out among large-growth funds. However, some good moves in tech helped the fund to lose less than its peers in 2001 and 2002. The fund is really showing its value this year, though, thanks to a bold bet on tech that Lange placed in the fourth quarter of 2002. What was once an average record is now quite impressive. Since Lange took over, the fund’s returns are more than twice that of the average large-growth fund.

Lange takes a free-wheeling approach with this fund as he invests in a wide range of market caps and industries. He even makes forays into Japanese stocks on occasion.

 Vanguard International Explorer (VINEX)
It’s easy to see why our opinion of this fund has improved. Last year Vanguard took this former Schroder fund under its wing and slashed its expense ratio to 0.75%. Talk about a category killer. You take one of the best managers in the foreign small/mid-growth space (Schroder, which still subadvises this offering), and you marry it to the low-cost leader (Vanguard) and you’ve got a fund with a big edge on the competition. The next cheapest retail fund in this category that’s currently open to investors is  T. Rowe Price International Discovery (PRIDX), which charges 1.44%.

That this fund is still managed by Schroder is reassuring, because it has produced top-quartile returns for the trailing three- and five-year periods. Mindful of the volatility and limited liquidity in smaller stocks, management diversifies into a large number of stocks and the top holding accounts for just 1.25% of assets.

There is one caveat: The fund comes with a $10,000 minimum and I wouldn’t recommend stretching to buy it if that would mean you have more than 10% of your portfolio here. It’s a volatile asset class that you don’t want at the heart of your portfolio.

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