FundInvestor - Hutto Dean & Co, Inc
May 2013 Vol. 21 No. 9
FundInvestor
SM
Research and recommendations for the serious fund investor
The Fantastic 51
You can set the bar really high these days. Even if you demand a lot, you can still find quite a few funds that pass all hurdles. Last year I shared the ”Fantastic 46” with you. This year I raised the bar on my tests and still reached 51 funds. Here’s what I want: a fund with expenses in the cheapest quintile, returns that beat the benchmark over the course of the manager’s tenure (minimum five years), manager investment of at least $500,000, a positive Parent rating, and a medalist Morningstar Analyst Rating. Last year I only wanted a Parent rating of Neutral or better and I didn’t include an Analyst Rating test. I also excluded true institutional funds. Those are funds where only institutions were able to get in over the history of the share classes. Some funds are labeled institutional but actually have a fairly low minimum investment available to individual investors. I included them as well as share classes that were once open to individual investors but closed to all but institutions when the fund company converted to load. I included them because many of you have some of those legacy share classes. Finally, I allowed PIMCO Total Return Institutional PTTRX in the list because so many investors have access to it through 401(k)s. One final note on the list: Because I screened out funds that lagged their indexes, no passively managed funds made the list. Thus, this is a great list
of actively managed funds. That’s not to suggest that index funds are not a good option. We have quite a few passive funds rated Gold that I consider excellent investments, such as Vanguard Total International Stock Index VITAX and DFA U.S. Micro Cap DFSCX.
Russel Kinnel, Director of Fund Research and Editor
Let’s take a look at some of the funds that made the Fantastic 51. American Funds to Start Ten funds from American made the list. They have low costs, experienced managers, high levels of manager investment, and strong long-term performance. For example, Fundamental Investors’ ANCFX longesttenured manager has been there since 1984, and over that time the fund has returned 11.9% annualized versus 10.8% for the S& P 500. Management looks for dominant global players that pay a respectable dividend. The fund has produced top-decile returns over the past 10 and 15 years. That’s a long record of sustained outperformance. One year’s returns won’t wow you, but it adds up over time. œ This is only an excerpt of the full article. The other funds were omitted for reprint purposes. The full article is available at mfi.morningstar.com.
Follow Russ on Twitter @RussKinnel
2 C Closed to new investors.
The Fantastic 51 Fund Name
Category
Analyst Rating
Overall Morningstar Risk
Expense Ratio (%)
Longest Mgr Tenure (Yr)
Mgr Return Start Date
Manager Return (%)
Benchmark Return (%)
Difference in Returns (%)
American Funds AMCAP A AMCPX
Large Growth
Œ
American Funds American Balanced A ABALX
Mod. Allocation
•
Below Avg.
0.73
16.9
06/1996
8.83
7.13
1.70
Average
0.63
16.3
02/1997
7.79
6.28
1.51
American Funds American Mutual A AMRMX
Large Value
American Funds Capital Inc Bldr A CAIBX
World Allocation
Œ
Low
0.63
7.3
02/2006
5.85
5.11
0.74
•
Average
0.63
21.3
01/1992
9.22
8.60
American Funds Fundamental Investors A ANCFX
0.62
Large Blend
Œ
Above Avg.
0.65
28.7
09/1984
11.92
10.81
1.11
American Funds Growth Fund of Amer A AGTHX
Large Growth
´
Below Avg.
0.71
27.4
12/1985
11.69
10.33
1.36
American Funds Inc Fund of Amer A AMECX
Mod. Allocation
•
Average
0.59
21.3
02/1992
9.07
8.73
0.34
American Funds Invmt Co of Amer A AIVSX
Large Blend
•
Below Avg.
0.62
21.1
04/1992
9.10
8.84
0.26
American Funds New World A NEWFX
Div. Emrg. Mkts
Œ
Low
1.07
13.8
07/1999
9.03
3.25
5.78
American Funds Washington Mutual A AWSHX
Large Value
Œ
Below Avg.
0.62
15.3
01/1998
5.86
5.09
0.77
Berwyn Income BERIX
Conserv. Alloc.
•
Below Avg.
0.64
7.3
01/2006
7.66
5.75
1.91
Davis Financial A RPFGX
Financial
Œ
Below Avg.
0.91
15.9
06/1997
6.42
5.86
0.56
Dodge & Cox Income DODIX
Interm-Trm Bnd
Œ
Average
0.43
24.3
02/1989
7.46
7.09
0.37
Dodge & Cox International Stock DODFX
Foreign Lrg Blnd
Œ
Above Avg.
0.64
11.9
06/2001
8.06
4.67
3.39
FPA Capital FPPTX C
Mid-Cap Value
•
Above Avg.
0.84
28.8
08/1984
14.97
11.86
3.11
FPA Paramount FPRAX
World Stock
•
Above Avg.
0.94
13.0
04/2000
9.20
7.00
2.20
Harbor Capital Appreciation Instl HACAX
Large Growth
Œ
Below Avg.
0.66
22.9
06/1990
9.78
8.24
1.54
Hussman Strategic Total Return HSTRX
Conserv. Alloc.
´
Below Avg.
0.63
10.6
10/2002
6.25
5.07
1.18
Invesco Equity and Income A ACEIX
Mod. Allocation
´
Average
0.80
13.9
06/1999
6.84
4.80
2.04
Janus Triton T JATTX
Small Growth
•
Below Avg.
0.94
6.8
08/2006
12.39
8.18
4.21
LKCM Equity Instl LKEQX
Large Growth
•
Below Avg.
0.80
17.3
01/1996
7.99
7.53
0.46
LKCM Small Cap Equity Instl LKSCX
Small Growth
•
Average
0.94
18.7
08/1994
11.23
9.02
2.21
MFS Total Return A MSFRX
Mod. Allocation
´
Below Avg.
0.77
11.2
02/2002
5.57
5.07
0.50
Mutual European Z MEURX C
Europe Stock
Œ
Low
1.13
8.3
01/2005
7.33
3.89
3.44
Perkins Mid Cap Value T JMCVX C
Mid-Cap Value
Œ
Low
0.83
14.6
09/1998
13.16
10.25
2.91
PIMCO Income D PONDX
Multisector Bond
•
Below Avg.
0.70
6.0
04/2007
11.05
5.83
5.22
PIMCO Total Return Instl PTTRX
Interm-Trm Bnd
Œ
Average
0.46
25.9
06/1987
8.32
7.17
1.15
PRIMECAP Odyssey Aggressive Growth POAGX
Mid-Cap Growth
Œ
Average
0.68
8.4
12/2004
10.57
5.74
4.83
PRIMECAP Odyssey Growth POGRX
Large Growth
Œ
Average
0.67
8.4
12/2004
8.68
5.74
2.94
PRIMECAP Odyssey Stock POSKX
Large Blend
Œ
Below Avg.
0.66
8.4
12/2004
7.74
5.74
2.00
Selected American Shares D SLADX
Large Blend
Œ
Average
0.61
18.3
01/1995
10.28
8.99
1.29
T. Rowe Price Blue Chip Growth TRBCX
Large Growth
•
Average
0.76
19.8
07/1993
9.34
8.62
0.72
T. Rowe Price Capital Appreciation PRWCX
Mod. Allocation
Œ
Above Avg.
0.71
6.8
07/2006
7.57
5.43
2.14
T. Rowe Price Equity Income PRFDX
Large Value
Œ
Average
0.68
27.4
11/1985
11.02
10.56
0.46
T. Rowe Price Growth Stock PRGFX
Large Growth
´
Average
0.70
5.4
11/2007
2.97
2.50
0.47
T. Rowe Price International Stock Fd PRITX
Foreign Lrg Grwth
•
Average
0.85
5.5
11/2007
-1.64
-3.21
1.57
T. Rowe Price Mid-Cap Growth RPMGX
Mid-Cap Growth
Œ
Average
0.80
20.8
07/1992
13.51
12.29
1.22
T. Rowe Price Mid-Cap Value TRMCX C
Mid-Cap Value
Œ
Below Avg.
0.81
12.3
01/2001
10.23
8.19
2.04
T. Rowe Price New America Growth PRWAX C
Large Growth
Œ
Average
0.81
10.7
08/2002
9.23
7.38
1.85
T. Rowe Price Overseas Stock TROSX
Foreign Lrg Blnd
´
Above Avg.
0.87
6.3
01/2007
0.04
-0.51
0.55
T. Rowe Price Small-Cap Stock OTCFX
Small Growth
•
Average
0.92
20.6
10/1992
12.05
9.58
2.47
Vanguard Capital Opportunity Inv VHCOX
Large Growth
Œ
Above Avg.
0.48
15.2
03/1998
12.55
6.34
6.21
Vanguard Energy Inv VGENX
Equity Energy
Œ
Low
0.31
10.3
01/2003
14.88
12.17
2.71
Vanguard Equity-Income Inv VEIPX
Large Value
•
Below Avg.
0.30
9.3
01/2004
7.46
6.30
1.16
Vanguard PRIMECAP Inv VPMCX C
Large Growth
Œ
Average
0.45
27.9
07/1985
12.80
10.44
2.36
Vanguard PRIMECAP Core Inv VPCCX C
Large Growth
Œ
Below Avg.
0.50
8.3
01/2005
7.90
5.82
2.08
Vanguard Selected Value Inv VASVX
Mid-Cap Value
Œ
Below Avg.
0.38
14.0
04/1999
10.08
9.50
0.58
Vanguard Wellesley Income Inv VWINX
Conserv. Alloc.
Œ
Below Avg.
0.25
5.3
01/2008
7.36
6.40
0.96
Vanguard Wellington Inv VWELX
Mod. Allocation
Œ
Average
0.25
12.3
01/2001
6.97
3.41
3.56
Vanguard Windsor II Adm VWNAX
Large Value
•
Average
0.27
27.8
07/1985
10.76
10.75
0.01
Wasatch Long/Short Investor FMLSX
Long/Short Eqty
•
Above Avg.
1.27
9.7
09/2003
6.98
6.89
0.09
Annualized returns through March 31, 2013.
The sections for the other funds were omitted for reprint purposes. The full article is available at mfi.morningstar.com. Reprinted by permission of Morningstar, Inc. © 2013 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; (3) does not constitute investment advice offered by Morningstar; and (4) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. Morningstar Analyst RatingTM for Funds: Unlike the backward-looking Morningstar RatingTM, often referred to as the “Star Rating,” the Morningstar Analyst Rating for Funds is the summary expression of Morningstar’s forward-looking analysis of a fund. The Rating is a subjective evaluation, performed by Morningstar mutual fund analysts, based on five key pillars: (1) Process, (2) Performance, (3) People, (4) Parent and (5) Price. Analysts use this five-pillar evaluation to identify funds they believe are more likely to outperform, on a risk-adjusted basis, their peer groups and/or relevant benchmarks over the long term. Analysts consider both quantitative and qualitative factors in their research, and the weighting of each pillar may vary. Ratings, which are reevaluated at least every 14 months, ultimately reflect analysts’ overall assessment and are overseen by Morningstar’s Analyst Rating Committee. Ratings are assigned globally on a five-tier scale, running from Gold (the highest rating) to Negative (the lowest rating). Funds with a Gold rating are best-of-breed funds that distinguish themselves across the five pillars and have garnered analysts’ highest level of conviction. That is, a Gold-rated fund should have: (1) a seasoned, talented and successful manager or management team; (2) a sound, thoughtful process that has been executed skillfully and consistently; (3) a portfolio that is in harmony with the stated process and capable of delivering a reward that compensates investors for the risks it takes; (4) reasonable expenses; and (5) a strong parent organization that is focused on responsible stewardship of investor assets. Funds with a Silver rating are those with notable advantages across several, but perhaps not all, of the five pillars — strengths that give analysts a high level of conviction. Funds with a Bronze rating are those with advantages that outweigh the disadvantages across the five pillars and with sufficient level of analyst conviction to warrant a positive rating. Funds with a Neutral rating are those that are not likely to deliver standout returns but also are not likely to significantly underperform, according to analysts. Funds with a Negative rating are those that have at least one flaw likely to significantly hamper future performance and that are considered by analysts as inferior offerings to their peers. Funds that receive a positive rating of Gold, Silver or Bronze are thought of highly by analysts, who expect these funds to outperform over a full market cycle of at least five years. The Morningstar Analyst Ratings in the article are based on the most recent ratings published by Morningstar as of May 2013. The Morningstar Analyst Rating should not be used as the sole basis in evaluating a mutual fund. Morningstar Analyst Ratings are based on Morningstar’s current expectations about future events; therefore, in no way does Morningstar represent ratings as a guarantee, nor should they be viewed by an investor as such. Morningstar Analyst Ratings involve unknown risks and uncertainties, which may cause Morningstar’s expectations not to occur or to differ significantly from what was expected. For more detailed information about Morningstar’s Analyst Rating, including its methodology, go to http://corporate.morningstar.com/us/documents/MethodologyDocuments/AnalystRatingforFundsMethodology.pdf. Morningstar Fund Spy tool: The Web-based tool, created by Morningstar, evaluates funds based on a set of criteria established by Russel Kinnel, director of fund research and editor. As listed on p. 1 of the article, the criteria applied are as follows: (1) A fund must have outperformed its prospectus benchmark over the tenure of the longest tenured manager. A minimum of five years is required. The test was run using returns through March 31, 2013; (2) expenses must be in the cheapest quintile of the category; (3) Parent ratings must be positive; (4) manager investment in the fund must be more than $500,000; and (5) a fund must be a “medalist” - i.e., it must be rated Bronze, Silver or Gold - in order to be considered. Using these five criteria, the tool filtered 51 out of a total 6,950 funds , excluding true institutional funds, for all share classes in the Morningstar database, as of March 2013; 10 of the 51 funds were American Funds. Morningstar Manager Return: A fund’s annualized return from the start date (the first day of the month shown) of the longest tenured manager. Morningstar Parent Rating: An assessment of the parent organization. Key (operational) areas of evaluating a parent organization include: recruitment and retention of talent, organizational structure, capacity management, organizational and business strategy, alignment of interests with fund investors and regulatory compliance. For fund firms receiving Stewardship Grades, the Stewardship Grade will determine the Parent rating for all funds in the family. Funds from firms earning A and B Stewardship Grades will have Parent ratings of Positive; those earning C Stewardship Grades will have a Neutral Parent rating; and funds from firms earning D and F Stewardship Grades will have Negative Parent ratings. For funds not under Stewardship Grade coverage, their Parent ratings of Positive, Neutral or Negative will be based on an analysis of the fund firm that is consistent with the Stewardship Grade methodology. Morningstar Risk: An assessment of the variations in a fund’s monthly returns, with an emphasis on downward variation. It is calculated as the difference between Morningstar Return (adjusted for loads and excess over the risk-free rate) and Morningstar Risk-Adjusted Return (adjusted for loads, excess over the risk-free rate and risk). Morningstar Risk is similar to (and correlated with) standard deviation; the key difference is that standard deviation gives the same weight to upside and downside variation. Morningstar Risk is measured for up to three periods (three, five and 10 years). For each period, all funds in a category are ranked by Morningstar Risk. The top 10% are given a risk score of 5, or “High”; the next 22.5% are scored 4, or “Above Average”; the next 35% are scored 3, or “Average”; the next 22.5% are scored 2, or “Below Average”; the bottom 10% are scored 1, or “Low.”
Figures shown are past results for Class A shares and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. Fund results are for Class A shares and reflect deduction of the 5.75% maximum sales charge. For current information and month-end results, visit americanfunds.com.
Results as of March 31, 2013 Fund Growth funds AMCAP Fund® The Growth Fund of America® New World Fund® Growth-and-income funds American Mutual Fund® Fundamental InvestorsSM The Investment Company of America® Washington Mutual Investors FundSM Equity-income funds Capital Income Builder ® The Income Fund of America® Balanced fund American Balanced Fund®
Inception date
Average annual total returns 5 years 10 years 5.82% 7.91% 3.22 8.76 0.46 13.88
Expense ratio
5/1/67 12/1/73 6/17/99
1 year 6.66% 7.63 1.88
Lifetime 11.19% 13.35 8.54
2/21/50 8/1/78 1/1/34 7/31/52
9.00 7.56 7.16 7.89
5.43 3.21 3.41 4.05
8.00 10.06 7.44 7.57
11.57 12.19 12.02 11.71
0.63 0.65 0.62 0.62
7/30/87 12/1/73
5.51 6.79
2.37 4.76
8.01 8.09
9.53 11.20
0.63 0.59
7/26/75
5.79
5.22
7.42
10.66
0.63
0.73% 0.71 1.07
Investment results assume all distributions are reinvested and reflect applicable fees and expenses. Expense ratios are as of each fund’s prospectus available at the time of publication. When applicable, investment results reflect fee waivers and/or expense reimbursements, without which results would have been lower. Please see americanfunds.com for more information. Investing outside the United States involves risks such as currency fluctuations, periods of illiquidity and price volatility, as more fully described in the prospectus. These risks may be heightened in connection with investments in developing countries. The return of principal for bond funds and for funds with significant underlying bond holdings is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks associated with the underlying bond holdings. Lower rated bonds are subject to greater fluctuations in value and risk of loss of income and principal than higher rated bonds. If used after June 30, 2013, this article must be accompanied by a current American Funds quarterly statistical update.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.
Lit. No. MFGEMR-006-0713P Litho in USA CGD/CG/10227-S38820 © 2013 American Funds Distributors, Inc.
Printed on recycled paper
FundInvestor
SM
Research and recommendations for the serious fund investor
The Fantastic 51
You can set the bar really high these days. Even if you demand a lot, you can still find quite a few funds that pass all hurdles. Last year I shared the ”Fantastic 46” with you. This year I raised the bar on my tests and still reached 51 funds. Here’s what I want: a fund with expenses in the cheapest quintile, returns that beat the benchmark over the course of the manager’s tenure (minimum five years), manager investment of at least $500,000, a positive Parent rating, and a medalist Morningstar Analyst Rating. Last year I only wanted a Parent rating of Neutral or better and I didn’t include an Analyst Rating test. I also excluded true institutional funds. Those are funds where only institutions were able to get in over the history of the share classes. Some funds are labeled institutional but actually have a fairly low minimum investment available to individual investors. I included them as well as share classes that were once open to individual investors but closed to all but institutions when the fund company converted to load. I included them because many of you have some of those legacy share classes. Finally, I allowed PIMCO Total Return Institutional PTTRX in the list because so many investors have access to it through 401(k)s. One final note on the list: Because I screened out funds that lagged their indexes, no passively managed funds made the list. Thus, this is a great list
of actively managed funds. That’s not to suggest that index funds are not a good option. We have quite a few passive funds rated Gold that I consider excellent investments, such as Vanguard Total International Stock Index VITAX and DFA U.S. Micro Cap DFSCX.
Russel Kinnel, Director of Fund Research and Editor
Let’s take a look at some of the funds that made the Fantastic 51. American Funds to Start Ten funds from American made the list. They have low costs, experienced managers, high levels of manager investment, and strong long-term performance. For example, Fundamental Investors’ ANCFX longesttenured manager has been there since 1984, and over that time the fund has returned 11.9% annualized versus 10.8% for the S& P 500. Management looks for dominant global players that pay a respectable dividend. The fund has produced top-decile returns over the past 10 and 15 years. That’s a long record of sustained outperformance. One year’s returns won’t wow you, but it adds up over time. œ This is only an excerpt of the full article. The other funds were omitted for reprint purposes. The full article is available at mfi.morningstar.com.
Follow Russ on Twitter @RussKinnel
2 C Closed to new investors.
The Fantastic 51 Fund Name
Category
Analyst Rating
Overall Morningstar Risk
Expense Ratio (%)
Longest Mgr Tenure (Yr)
Mgr Return Start Date
Manager Return (%)
Benchmark Return (%)
Difference in Returns (%)
American Funds AMCAP A AMCPX
Large Growth
Œ
American Funds American Balanced A ABALX
Mod. Allocation
•
Below Avg.
0.73
16.9
06/1996
8.83
7.13
1.70
Average
0.63
16.3
02/1997
7.79
6.28
1.51
American Funds American Mutual A AMRMX
Large Value
American Funds Capital Inc Bldr A CAIBX
World Allocation
Œ
Low
0.63
7.3
02/2006
5.85
5.11
0.74
•
Average
0.63
21.3
01/1992
9.22
8.60
American Funds Fundamental Investors A ANCFX
0.62
Large Blend
Œ
Above Avg.
0.65
28.7
09/1984
11.92
10.81
1.11
American Funds Growth Fund of Amer A AGTHX
Large Growth
´
Below Avg.
0.71
27.4
12/1985
11.69
10.33
1.36
American Funds Inc Fund of Amer A AMECX
Mod. Allocation
•
Average
0.59
21.3
02/1992
9.07
8.73
0.34
American Funds Invmt Co of Amer A AIVSX
Large Blend
•
Below Avg.
0.62
21.1
04/1992
9.10
8.84
0.26
American Funds New World A NEWFX
Div. Emrg. Mkts
Œ
Low
1.07
13.8
07/1999
9.03
3.25
5.78
American Funds Washington Mutual A AWSHX
Large Value
Œ
Below Avg.
0.62
15.3
01/1998
5.86
5.09
0.77
Berwyn Income BERIX
Conserv. Alloc.
•
Below Avg.
0.64
7.3
01/2006
7.66
5.75
1.91
Davis Financial A RPFGX
Financial
Œ
Below Avg.
0.91
15.9
06/1997
6.42
5.86
0.56
Dodge & Cox Income DODIX
Interm-Trm Bnd
Œ
Average
0.43
24.3
02/1989
7.46
7.09
0.37
Dodge & Cox International Stock DODFX
Foreign Lrg Blnd
Œ
Above Avg.
0.64
11.9
06/2001
8.06
4.67
3.39
FPA Capital FPPTX C
Mid-Cap Value
•
Above Avg.
0.84
28.8
08/1984
14.97
11.86
3.11
FPA Paramount FPRAX
World Stock
•
Above Avg.
0.94
13.0
04/2000
9.20
7.00
2.20
Harbor Capital Appreciation Instl HACAX
Large Growth
Œ
Below Avg.
0.66
22.9
06/1990
9.78
8.24
1.54
Hussman Strategic Total Return HSTRX
Conserv. Alloc.
´
Below Avg.
0.63
10.6
10/2002
6.25
5.07
1.18
Invesco Equity and Income A ACEIX
Mod. Allocation
´
Average
0.80
13.9
06/1999
6.84
4.80
2.04
Janus Triton T JATTX
Small Growth
•
Below Avg.
0.94
6.8
08/2006
12.39
8.18
4.21
LKCM Equity Instl LKEQX
Large Growth
•
Below Avg.
0.80
17.3
01/1996
7.99
7.53
0.46
LKCM Small Cap Equity Instl LKSCX
Small Growth
•
Average
0.94
18.7
08/1994
11.23
9.02
2.21
MFS Total Return A MSFRX
Mod. Allocation
´
Below Avg.
0.77
11.2
02/2002
5.57
5.07
0.50
Mutual European Z MEURX C
Europe Stock
Œ
Low
1.13
8.3
01/2005
7.33
3.89
3.44
Perkins Mid Cap Value T JMCVX C
Mid-Cap Value
Œ
Low
0.83
14.6
09/1998
13.16
10.25
2.91
PIMCO Income D PONDX
Multisector Bond
•
Below Avg.
0.70
6.0
04/2007
11.05
5.83
5.22
PIMCO Total Return Instl PTTRX
Interm-Trm Bnd
Œ
Average
0.46
25.9
06/1987
8.32
7.17
1.15
PRIMECAP Odyssey Aggressive Growth POAGX
Mid-Cap Growth
Œ
Average
0.68
8.4
12/2004
10.57
5.74
4.83
PRIMECAP Odyssey Growth POGRX
Large Growth
Œ
Average
0.67
8.4
12/2004
8.68
5.74
2.94
PRIMECAP Odyssey Stock POSKX
Large Blend
Œ
Below Avg.
0.66
8.4
12/2004
7.74
5.74
2.00
Selected American Shares D SLADX
Large Blend
Œ
Average
0.61
18.3
01/1995
10.28
8.99
1.29
T. Rowe Price Blue Chip Growth TRBCX
Large Growth
•
Average
0.76
19.8
07/1993
9.34
8.62
0.72
T. Rowe Price Capital Appreciation PRWCX
Mod. Allocation
Œ
Above Avg.
0.71
6.8
07/2006
7.57
5.43
2.14
T. Rowe Price Equity Income PRFDX
Large Value
Œ
Average
0.68
27.4
11/1985
11.02
10.56
0.46
T. Rowe Price Growth Stock PRGFX
Large Growth
´
Average
0.70
5.4
11/2007
2.97
2.50
0.47
T. Rowe Price International Stock Fd PRITX
Foreign Lrg Grwth
•
Average
0.85
5.5
11/2007
-1.64
-3.21
1.57
T. Rowe Price Mid-Cap Growth RPMGX
Mid-Cap Growth
Œ
Average
0.80
20.8
07/1992
13.51
12.29
1.22
T. Rowe Price Mid-Cap Value TRMCX C
Mid-Cap Value
Œ
Below Avg.
0.81
12.3
01/2001
10.23
8.19
2.04
T. Rowe Price New America Growth PRWAX C
Large Growth
Œ
Average
0.81
10.7
08/2002
9.23
7.38
1.85
T. Rowe Price Overseas Stock TROSX
Foreign Lrg Blnd
´
Above Avg.
0.87
6.3
01/2007
0.04
-0.51
0.55
T. Rowe Price Small-Cap Stock OTCFX
Small Growth
•
Average
0.92
20.6
10/1992
12.05
9.58
2.47
Vanguard Capital Opportunity Inv VHCOX
Large Growth
Œ
Above Avg.
0.48
15.2
03/1998
12.55
6.34
6.21
Vanguard Energy Inv VGENX
Equity Energy
Œ
Low
0.31
10.3
01/2003
14.88
12.17
2.71
Vanguard Equity-Income Inv VEIPX
Large Value
•
Below Avg.
0.30
9.3
01/2004
7.46
6.30
1.16
Vanguard PRIMECAP Inv VPMCX C
Large Growth
Œ
Average
0.45
27.9
07/1985
12.80
10.44
2.36
Vanguard PRIMECAP Core Inv VPCCX C
Large Growth
Œ
Below Avg.
0.50
8.3
01/2005
7.90
5.82
2.08
Vanguard Selected Value Inv VASVX
Mid-Cap Value
Œ
Below Avg.
0.38
14.0
04/1999
10.08
9.50
0.58
Vanguard Wellesley Income Inv VWINX
Conserv. Alloc.
Œ
Below Avg.
0.25
5.3
01/2008
7.36
6.40
0.96
Vanguard Wellington Inv VWELX
Mod. Allocation
Œ
Average
0.25
12.3
01/2001
6.97
3.41
3.56
Vanguard Windsor II Adm VWNAX
Large Value
•
Average
0.27
27.8
07/1985
10.76
10.75
0.01
Wasatch Long/Short Investor FMLSX
Long/Short Eqty
•
Above Avg.
1.27
9.7
09/2003
6.98
6.89
0.09
Annualized returns through March 31, 2013.
The sections for the other funds were omitted for reprint purposes. The full article is available at mfi.morningstar.com. Reprinted by permission of Morningstar, Inc. © 2013 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; (3) does not constitute investment advice offered by Morningstar; and (4) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. Morningstar Analyst RatingTM for Funds: Unlike the backward-looking Morningstar RatingTM, often referred to as the “Star Rating,” the Morningstar Analyst Rating for Funds is the summary expression of Morningstar’s forward-looking analysis of a fund. The Rating is a subjective evaluation, performed by Morningstar mutual fund analysts, based on five key pillars: (1) Process, (2) Performance, (3) People, (4) Parent and (5) Price. Analysts use this five-pillar evaluation to identify funds they believe are more likely to outperform, on a risk-adjusted basis, their peer groups and/or relevant benchmarks over the long term. Analysts consider both quantitative and qualitative factors in their research, and the weighting of each pillar may vary. Ratings, which are reevaluated at least every 14 months, ultimately reflect analysts’ overall assessment and are overseen by Morningstar’s Analyst Rating Committee. Ratings are assigned globally on a five-tier scale, running from Gold (the highest rating) to Negative (the lowest rating). Funds with a Gold rating are best-of-breed funds that distinguish themselves across the five pillars and have garnered analysts’ highest level of conviction. That is, a Gold-rated fund should have: (1) a seasoned, talented and successful manager or management team; (2) a sound, thoughtful process that has been executed skillfully and consistently; (3) a portfolio that is in harmony with the stated process and capable of delivering a reward that compensates investors for the risks it takes; (4) reasonable expenses; and (5) a strong parent organization that is focused on responsible stewardship of investor assets. Funds with a Silver rating are those with notable advantages across several, but perhaps not all, of the five pillars — strengths that give analysts a high level of conviction. Funds with a Bronze rating are those with advantages that outweigh the disadvantages across the five pillars and with sufficient level of analyst conviction to warrant a positive rating. Funds with a Neutral rating are those that are not likely to deliver standout returns but also are not likely to significantly underperform, according to analysts. Funds with a Negative rating are those that have at least one flaw likely to significantly hamper future performance and that are considered by analysts as inferior offerings to their peers. Funds that receive a positive rating of Gold, Silver or Bronze are thought of highly by analysts, who expect these funds to outperform over a full market cycle of at least five years. The Morningstar Analyst Ratings in the article are based on the most recent ratings published by Morningstar as of May 2013. The Morningstar Analyst Rating should not be used as the sole basis in evaluating a mutual fund. Morningstar Analyst Ratings are based on Morningstar’s current expectations about future events; therefore, in no way does Morningstar represent ratings as a guarantee, nor should they be viewed by an investor as such. Morningstar Analyst Ratings involve unknown risks and uncertainties, which may cause Morningstar’s expectations not to occur or to differ significantly from what was expected. For more detailed information about Morningstar’s Analyst Rating, including its methodology, go to http://corporate.morningstar.com/us/documents/MethodologyDocuments/AnalystRatingforFundsMethodology.pdf. Morningstar Fund Spy tool: The Web-based tool, created by Morningstar, evaluates funds based on a set of criteria established by Russel Kinnel, director of fund research and editor. As listed on p. 1 of the article, the criteria applied are as follows: (1) A fund must have outperformed its prospectus benchmark over the tenure of the longest tenured manager. A minimum of five years is required. The test was run using returns through March 31, 2013; (2) expenses must be in the cheapest quintile of the category; (3) Parent ratings must be positive; (4) manager investment in the fund must be more than $500,000; and (5) a fund must be a “medalist” - i.e., it must be rated Bronze, Silver or Gold - in order to be considered. Using these five criteria, the tool filtered 51 out of a total 6,950 funds , excluding true institutional funds, for all share classes in the Morningstar database, as of March 2013; 10 of the 51 funds were American Funds. Morningstar Manager Return: A fund’s annualized return from the start date (the first day of the month shown) of the longest tenured manager. Morningstar Parent Rating: An assessment of the parent organization. Key (operational) areas of evaluating a parent organization include: recruitment and retention of talent, organizational structure, capacity management, organizational and business strategy, alignment of interests with fund investors and regulatory compliance. For fund firms receiving Stewardship Grades, the Stewardship Grade will determine the Parent rating for all funds in the family. Funds from firms earning A and B Stewardship Grades will have Parent ratings of Positive; those earning C Stewardship Grades will have a Neutral Parent rating; and funds from firms earning D and F Stewardship Grades will have Negative Parent ratings. For funds not under Stewardship Grade coverage, their Parent ratings of Positive, Neutral or Negative will be based on an analysis of the fund firm that is consistent with the Stewardship Grade methodology. Morningstar Risk: An assessment of the variations in a fund’s monthly returns, with an emphasis on downward variation. It is calculated as the difference between Morningstar Return (adjusted for loads and excess over the risk-free rate) and Morningstar Risk-Adjusted Return (adjusted for loads, excess over the risk-free rate and risk). Morningstar Risk is similar to (and correlated with) standard deviation; the key difference is that standard deviation gives the same weight to upside and downside variation. Morningstar Risk is measured for up to three periods (three, five and 10 years). For each period, all funds in a category are ranked by Morningstar Risk. The top 10% are given a risk score of 5, or “High”; the next 22.5% are scored 4, or “Above Average”; the next 35% are scored 3, or “Average”; the next 22.5% are scored 2, or “Below Average”; the bottom 10% are scored 1, or “Low.”
Figures shown are past results for Class A shares and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. Fund results are for Class A shares and reflect deduction of the 5.75% maximum sales charge. For current information and month-end results, visit americanfunds.com.
Results as of March 31, 2013 Fund Growth funds AMCAP Fund® The Growth Fund of America® New World Fund® Growth-and-income funds American Mutual Fund® Fundamental InvestorsSM The Investment Company of America® Washington Mutual Investors FundSM Equity-income funds Capital Income Builder ® The Income Fund of America® Balanced fund American Balanced Fund®
Inception date
Average annual total returns 5 years 10 years 5.82% 7.91% 3.22 8.76 0.46 13.88
Expense ratio
5/1/67 12/1/73 6/17/99
1 year 6.66% 7.63 1.88
Lifetime 11.19% 13.35 8.54
2/21/50 8/1/78 1/1/34 7/31/52
9.00 7.56 7.16 7.89
5.43 3.21 3.41 4.05
8.00 10.06 7.44 7.57
11.57 12.19 12.02 11.71
0.63 0.65 0.62 0.62
7/30/87 12/1/73
5.51 6.79
2.37 4.76
8.01 8.09
9.53 11.20
0.63 0.59
7/26/75
5.79
5.22
7.42
10.66
0.63
0.73% 0.71 1.07
Investment results assume all distributions are reinvested and reflect applicable fees and expenses. Expense ratios are as of each fund’s prospectus available at the time of publication. When applicable, investment results reflect fee waivers and/or expense reimbursements, without which results would have been lower. Please see americanfunds.com for more information. Investing outside the United States involves risks such as currency fluctuations, periods of illiquidity and price volatility, as more fully described in the prospectus. These risks may be heightened in connection with investments in developing countries. The return of principal for bond funds and for funds with significant underlying bond holdings is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks associated with the underlying bond holdings. Lower rated bonds are subject to greater fluctuations in value and risk of loss of income and principal than higher rated bonds. If used after June 30, 2013, this article must be accompanied by a current American Funds quarterly statistical update.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.
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