Value stocks tend to have less attractive business prospects-and hence trade at lower valuationsthan their faster-growing counterparts. They tend to be less profitable, grow more slowly, and are less likely to enjoy sustainable competitive advantages than growth stocks. Because there can be good reasons for their lower valuations, value stocks are not necessarily bargains. But despite their less-attractive prospects, value stocks have historically generated better returns (relative to their volatility) than growth stocks in nearly every market studied over long time horizons. This may be because investors extrapolate past growthor lack thereoftoo far into the future. This can make value investingor tilting a portfolio toward value stocks-a rewarding strategy for patient investors. For this list, we screened for highly rated value funds but also required that the fund’s underlying portfolios have at least a “narrow” Average Economic Moat Rating to help raise the quality quotient.
Morningstar Analyst Rating
|American Century Equity Income Inv||TWEIX||Large Value||Moderate|
|QOJ Cxpecmgb Tcraora L||YMOIC||Large Value||Moderate|
|RVP Fbbrtzqc O||HAJQA||Large Value||Moderate|
|AfxhyMfxi Enjbql Xywdlqdn Vikhg||YZIAV||Large Value||Moderate|
|Rwqhln Wkppumde Uda Zrs Rwgya Fnibi||ETXOV||Large Value||Narrow|
|OszmzXpzsja Zbfqw Wav Exbav C||MYHJV||Large Value||Moderate|
|Rzyxgrnb Nybtbkds Vjxkkw Uyxw||IFLKM||Large Value||Moderate|
|KTD DW Isswj Bha Prrxq H||XEIYB||Large Value||Narrow|
|Gvzmouf Yknm Ufu Siu T||MLVJV||Mid-Cap Value|
|Ouojxsr Sgsr Ajnpe-Uzf Pvo R||KCMOC||Mid-Cap Value|
|Uaegt & Fxs Hlwtt||SOFOY||Large Value||Moderate|
|Dbqpyewl® Ydv-Lgujzd Rudjy||NFOTC||Mid-Cap Value||Minimal|
|Ifzfoeyr® Whk-Tfmnyd Rhlbv C7||FMPVK||Mid-Cap Value||Minimal|
|Ygqfca Srq Ipu Elqhl Pvmtb||FZXBZ||Mid-Cap Value||Minimal|
|Mjctqbhd Zytoleay zti Skflpj O||QVFGO||Large Value||Moderate|
|Dhzvfnci Kamuit Goegjg K||UTPQF||Large Value||Moderate|
|pVtssvm Drom K&T DB Wxerv ICU||CGNB||Large Value||Moderate|
|vYlteyl Invq BQAU Rzhyucqorwr YSJ COE||GARR||Large Value||Narrow|
|uOsvcnk Fmenzfs Sen-Lbm Utszi SAU||BWI||Mid-Cap Value||Minimal|
|nHzujkf A&Z Ugc-Ujd 594 Luqip UMY||LLB||Mid-Cap Value|
|NAofdweh Jnikokmrtxq Enwoz N||WWIJS||Large Value||Narrow|
|NQctlzdr Arbfagvdzwx Mfhby Ttt Iic L||UVAJZ||Mid-Cap Value||Narrow|
|YPTcvcno Pvjooo Nxnssf N||MXGEK||Large Value||Moderate|
|QRRybxga Uuz Eaj Zpqmx G||SPGVZ||Mid-Cap Value||Narrow|
|RGNyigik Swuuw Piolvouvw N||OMPKA||Large Value||Narrow|
|GKB Jipdd Alcjoq||AFVEJ||Large Value||Narrow|
|Kviqyjfrg Ierjyh Vtfieu Kpkkul Jwjt||YPDGY||Large Value||Moderate|
|Tiohmqyyv Srytw-SmvVcc Aumkywag Tjy Rtnb||NAMJX||Mid-Cap Value|
|Iafybu PG Burduaxa Ixuzhg WYS™||OAFN||Large Value||Wide|
|Aahbun DE Ahnae-Rvu Xmcnj GCJ™||JIVS||Large Value||Moderate|
|YNAO® M&A Nooyqghc GCC||SDB||Large Value||Narrow|
|O. Rvzs Ihmmu Dlwkdw Cpkoap||TEPUB||Large Value||Narrow|
|F. Mytl Sltqm Ydj-Jgx Ixfwz||FTQVC||Mid-Cap Value||Narrow|
|Nkqahyam Xyddub-Bbjjcl Nra||YNKJU||Large Value||Moderate|
|Lcyjfsas Zuyl Joopjpnu Sfzmq LKD||IPS||Large Value||Moderate|
|Uvmntqpj Rrqf Vmj Irkev VQI||WAV||Large Value||Moderate|
|Pgcbeeyj Jda-Cks Skpgj ZLY||WDW||Mid-Cap Value||Minimal|
|Yozthwhy Hussa Uvray Ira||ZIJYR||Large Value||Moderate|
|GF® HJGbqpgj Gny Lht Nvlfc B||XQOQF||Mid-Cap Value||Narrow|
Mid- and Large-Cap Value Funds
These funds primarily own what Morningstar identifies as “value” stocks (which fall into the value squares of the Morningstar style box). The value classification is based on forward-looking measures (including price/prospective earnings) and historical measures (including price/book, price/sales, price/cash flow, and dividend yield).
Gold- and Silver-Rated Funds
The Analyst Rating for Funds is based on our fund analysts’ conviction in a fund’s ability to outperform its peer group (funds in the same category) and benchmark on a risk-adjusted basis over the long term. If a fund receives a Gold, Silver, or Bronze rating (i.e., a Medalist rating), it means that Morningstar analysts expect it to outperform over a full market cycle of at least five years.
Average Economic Moat Rating: Narrow or Higher
The idea of an economic moat refers to how likely companies are to keep competitors at bay for an extended period. Stocks are individually rated by Morningstar equity analysts as Wide (strong competitive advantage), Narrow (some competitive advantage), and None (no competitive advantage). Morningstar calculates an average economic moat score for mutual funds by utilizing the economic moat ratings assigned to each fund’s underlying stock holdings. At least 50% of a fund’s underlying holdings (as of its most recently reported portfolio) must have a moat rating in order for the fund to receive a moat score.
Open to New Investment
All the funds on this list are open for new investment. Sometimes mutual funds will close to new investors when the fund is receiving more money than the management team believes it can invest effectively. Closing a fund under these circumstances is usually considered investor-friendly, as funds that get too big can sometimes suffer performance problems later. Even though new investors can’t get into closed funds (so such funds are not included here), closed funds that are rated Gold, Silver, or Bronze may be worth putting on a watch list.
This list includes only no-load funds. “No load” refers to a mutual fund that does not charge a fee (known as a load) for buying or selling its shares; the investor typically buys no-load funds directly from a fund company or through a fund supermarket. Load funds, on the other hand, are sold by an advisor or broker and charge a percentage fee at purchase or sale of the shares, which is meant to be compensation for the planner’s investment-selection advice. (Note: Not all advisors sell load funds. Many are compensated via a flat fee or a percentage of all assets under management.) Whether a fund charges a load or not isn’t a reflection of its underlying quality. Many load funds are also Medalists, and some load funds are available without a load through 401(k) or other retirement plans. But we’re including only no-load funds here, since this list is designed to help investors who are primarily doing their own fund-picking.
Distinct Portfolios Only
Many fund families offer multiple versions of the same fund but with variations on the sales fees that are charged and/or investor qualifications. Screening for “distinct portfolios only” removes all but one of these options to avoid having several share classes of the same offering cluttering the list. Morningstar normally designates the oldest share class as the distinct portfolio. In some cases, this share class may be for institutions (such as company retirement funds) or otherwise have a high investment minimum. In those cases, investors may want to consider an “investor” share class of the same fund, though the fund expenses may be higher for those share classes.