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.

 
 
Jan 20, 2018
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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
Manager of the Year Nominees

We've named our nominees for Morningstar International-Stock Fund Manager of the Year and Domestic-Stock Fund Manager of the Year. Let me know what you think of our choices:

International-Stock Fund Manager of the Year
http://news.morningstar.com/articlenet/article.aspx?id=843493

Domestic-Stock Fund Manager of the Year
http://news.morningstar.com/articlenet/article.aspx?id=842827

Vanguard U.S. Value Upgraded

We have upgraded Vanguard U.S. Value's VUVLX rating to Silver from Bronze. Here is Jason Kephart's analysis.

Vanguard U.S. Value's reasonable stock-picking approach and extremely low costs give it a long-term edge versus peers and its benchmark. We have upgraded its Morningstar Analyst Rating to Silver from Bronze.

This fund is managed by Vanguard's experienced quantitative team. The team believes that stock prices follow earnings and has a screening method to find stocks it believes will grow earnings faster than peers and are trading at a discount. The screen looks for stocks that score well on five factors--valuation, growth, quality, momentum, and management decisions (such as stock buybacks)--relative to industry peers. The momentum factor plays a defensive role here as it can pick up on real-time changes in how a stock is viewed by the market that wouldn't be apparent on a balance sheet, like an abrupt CEO departure. This should help the fund avoid value traps.

Management applies its systematic stock selection to the Russell 3000 Value Index. It's a broader investment universe than many peers, which are commonly benchmarked to the large-cap-focused Russell 1000 Value Index, so it's not surprising that the fund tends to have more of a smaller-cap bias than peers. As of September 2017, for example, the fund had a 38% allocation to small and mid-caps, about 14 percentage points higher than the U.S. large-value Morningstar Category norm. In years like 2017, when small-cap value was the worst-performing category, this fund should be expected to trail peers, as it did.

Compared with category peers, this fund gets a big head start thanks to its low fees. Its single share class charges 0.23%, while the median fee for a large-value fund is 0.90%. Stock-picking has been strong, as evidenced by the fund's 1% annualized alpha compared with the index through the end of 2017. The fund's 0.53 information ratio during that period implies the alpha was the result of many successful bets rather than a few big calls.

The fund will serve long-term investors well.

 

 

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