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A Reliable--and Recently Reopened--Mid-Cap Fund

A Reliable--and Recently Reopened--Mid-Cap Fund
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FMI Common Stock Investor

Gretchen Rupp: FMI Common Stock is a mid-cap blend fund that's recently reopened to new investors. Pat English has managed this for nearly 20 years. He works alongside an experienced team of seven additional analysts, each of whom is also a named manager on the strategy. The team follows a valuation-centric process that shines in rough markets, making it a reliable choice for risk-averse investors.

The managers choose high-quality businesses that have steady revenues and strong returns on invested capital. They focus on companies that can grow profits, not just earnings, and their typical stock will have lower than average debt levels.

The team won't overpay for quality. Analysts tend to focus on a stock's price/sales ratio because they think a company's earnings can be easily manipulated. As of the end of 2016, the fund's average price/sales ratio was about 30% lower than its peers'. But this value-centric approach means new opportunities can be scarce after an extended rally, and the fund's cash stake grew to about 17% as December 2016.

The fund is concentrated; managers typically hold between 40 and 50 stocks. And turnover is low, about 25% in the last several years, which means the managers typically hold a stock for about four years.

Over a full market cycle, patient investors have been rewarded. Its 9.8% annualized gain during Pat English's tenure beats the Russell 2000's 7.3% gain. The fund is a standout during market pullbacks, including the 2008 financial crisis, but will often fall behind when markets surge ahead. The fund earns a Morningstar Analyst Rating of Gold.

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About the Author

Gretchen Rupp


Gretchen Rupp is a manager research analyst for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. She covers multiasset strategies, focusing on allocation funds and 529 college-savings plans.

Before joining Morningstar in 2014, Rupp was a defined-benefit pension plan consultant for Towers Watson (formerly Towers Perrin). She also has experience in strategy consulting and investment banking.

Rupp holds a bachelor’s degree in math and statistics from Miami University and a master’s degree in business administration from The Wharton School of the University of Pennsylvania.

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