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 manager 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.

 
About Russel Russ' Photo
Russel Kinnel,
Director of Manager Research and Editor, Morningstar FundInvestor
Russel Kinnel is director of manager research for Morningstar, Inc. and editor of Morningstar FundInvestor, a monthly print newsletter for individual investors.
Featured Posts
This Bear Has Claws

Oh. So, it's one of those nasty bear markets, not the little-bee-sting kind of bear market.

Growth stocks had a huge run filled with frothy, crazy stuff like meme stocks, SPACs, and ARKKs. So, they were kind of set up for a fall. But the fall has gotten pretty harsh, to the point where many people argue growth stocks are now attractive.

Through May 19, the large-growth Morningstar Category was down a nasty 27%. The mid-growth category was off 28%, and small growth was also down 28%.

Why has the selloff had a second leg down? Valuations were too high, but a big spike in inflation hurt, too, as future earnings at growth companies are now discounted significantly more than before. Another reason is that big market moves usually overdo it. Just as the rally went on too long, so too do corrections. With hindsight, the bear markets of 2000-02, 2008-09, and probably 2020 were great buying opportunities, but that doesn't make it any easier to buy this time.

This week another worrying front developed as Wal-Mart WMT and Target TGT got crushed after posting earnings. Inflation is clearly impacting consumers, and that is hurting retail stocks across the board. Likewise, retailers and other businesses have switched from rapid hiring to job cuts almost overnight.

One positive is that the downturn has been quite mild in valueland, where at least some companies are benefiting from the spike in oil prices. Large value and mid-value are down around 7%, and small value is off 10%.

A possibly positive thing is that market cycles seem to move faster. We got the 2020 bear market over in a couple of months. Will we be that lucky this time? I have no idea.

In my own accounts I’ve been putting cash to work with about half into growth stocks, one fourth into value, and one fourth into bonds. Again, I still have no idea about the market for the rest of the year. But I'll probably buy more if we get another leg down.

The Winners
I can count the winners on one hand, but let's mention three before we get to the red ink.

Pimco Commodity Real Return Strategy PCRAX was up 29% through May 19 thanks to the great spike in commodities. Vanguard Energy VGENX was up 17.9% as oil company stocks are up nicely, even if not as much as oil prices. Then there's Hotchkis & Wiley Mid-Cap Value HWMAX. The fund was up 0.5% because it stuck to its guns on energy stocks even though it got thumped in 2020.

The Losers
ARK Innovation had a basket full of the most speculative growth stocks you could find, and it's down 56% this year. Dennis Lynch's Morgan Stanley Institutional Growth MSEGX is also fond of superfast growth plays, and it's down 55%.

Artisan Developing World ARTYX mixes speculative names with more-staid names, so I'm surprised to see it in the bottom percentile of emerging-markets funds with a 40% loss in 2022. Alger Small Cap Focus' AOFAX 38% decline is less surprising as it is a fairly aggressive highflier, though not in the realm of Lynch and ARK's Cathie Wood.

What Should You Do?
Just once I would like to tell everyone to panic, but since I just said I was buying that would be a bad look. During the 2000-02 bear market, I asked Jack Bogle what people should do, and he said: "Don't just do something, sit there!" Hard to improve on that.

Recent Gold-Rated Fund Analysis
 

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About the Editor


Russel Kinnel is director of manager 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.

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.