Investment Strategy
We seek to pick winning funds with superior management and quantitative characteristics linked to strong performance. Our quantitative research uses the most comprehensive mutual fund database in the world to determine the best strategies for long-term investing success. We then supplement those studies with extensive qualitative research of portfolio managers, analysts, and traders through onsite visits and follow-up phone calls.
 
About the Editor
Russel Kinnel is director of mutual fund research for Morningstar, Inc. and editor of Morningstar FundInvestor, a monthly print newsletter for individual investors. He also writes the Fund Spy column for Morningstar.com, the company's investment Web site.

Since joining the company in 1994, Kinnel has covered the Fidelity, Janus, T. Rowe Price, and Vanguard mutual fund families. He helped develop the new Morningstar Rating for funds and the new Morningstar Style Box methodology. He also is co-author of the company's first book, The Morningstar Guide to Mutual Funds: 5-Star Strategies for Success, which was published in January 2003.

 
 
Dec 22, 2014
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About Russel Russ' Photo
Russel Kinnel,
Director of Fund Research and Editor, Morningstar FundInvestor
Russel Kinnel is director of mutual fund research for Morningstar, Inc. and editor of Morningstar FundInvestor, a monthly print newsletter for individual investors.
Featured Posts
Discussing Low-Risk Funds

As part of the December issue release, Christine Benz and I discussed three funds that manage the downside well. Here's a link to the video.

A Great Jobs Report, but Take It With a Grain of Salt
Last Friday, the United States posted some great numbers on unemployment, but our Bob Johnson says the report has got flaws and isn't a game changer. Here's his take.

Ideas for Stock-Pickers
If you like to buy individual stocks, we have lined up some good ideas for foreign equities here

Delafield Downgraded
We've downgraded Delafield Fund DEFIX to Bronze. Here is Kevin McDevitt's take:

Delafield's struggles on a risk-adjusted basis have led to a downgrade.

This fund's long-term results remain solid, but less so on a risk-adjusted basis. For this reason, its Morningstar Analyst Rating is being downgraded to Bronze from Silver. Since the fund's 1993 inception, managers Dennis Delafield and Vince Sellecchia have steered it to an 11.8% annualized gain through November 2014, beating the Russell 2500 Value Index by nearly 70 basis points. They did so by buying beaten-down small- and mid-cap firms in various stages of turnarounds or
restructurings. But given the significant uncertainty associated with such companies, their stocks tend to be more volatile than most. The fund's Sortino
ratio, a measure of risk-adjusted results, is no better than that of the Russell 2500 Value; they clock in at 0.71 and 0.73, respectively.

The fund's results during 2014's second-half sell-off are a reminder of its mixed record during bear markets. In the five months from July through November, the fund lost 8.5% versus a drop of just 1.8% for its benchmark. This owes to the fund's highly cyclical equity portfolio, about 75% of which is in just three sectors: energy, materials, and industrials. These three have been among the market's worst performers year to date. It's reminiscent of the fund's poor results in 2011
when cyclicals were also battered.

This time around, the fund's energy holdings have done major damage. Somewhat uncharacteristically, the team added to energy stocks in 2013 and the first two quarters of 2014 in part because of geopolitical fears. The position was built from nothing at the end of 2012 to 10.2% of assets in September 2014, just as oil prices fell because of U.S. shale production and modest global growth. The team acknowledges that its thesis was off and it has stopped adding to these positions; it has even taken some tax losses.

This fund still owns a successful track record and the team can still deliver, but the past few years make it clear that this isn't a core holding. It won't track the market, and this should be a good thing at some point. But the fund still needs a long runway and patient shareholders to work.

 

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