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.

 
 
Aug 23, 2017
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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
One Upgrade and One Downgrade
We have upgraded a T. Rowe Price fund and downgraded a Fidelity fund. See below for details.

Bob Johnson's Parting Thoughts
We're sad to see Morningstar economist Bob Johnson go. Here are his thoughts on nine years of economic analysis.

T. Rowe Price International Stock Upgraded
By Bill Rocco

Lead manager Richard Clattenburg has worked on T. Rowe International Stock PRITX in various capacities for 10 years now. He has gotten off to a pretty good start at the helm. And this fund's other strengths remain intact. Therefore, this fund's Morningstar Analyst Rating rises to Bronze from Neutral.

Clattenburg joined former lead manager Robert Smith as an analyst on this foreign large-growth fund in 2007. He was promoted to associate manager on this fund in 2010, and he remained in that position until he replaced Smith as the lead manager on April 1, 2015. (Smith remained at T. Rowe Price and served as a member of this fund's advisory team until he retired from the firm at the end of 2016.)

Meanwhile, Clattenburg, who has 14 years of investment experience overall, has made a number of good decisions, as most emerging markets have gyrated to moderate gains during his 28 months at helm. His stock selection, for example, has paid off in China as well as several European markets. As result, from April 1, 2015, through July 31, 2017, this fund had a Morningstar Risk-Adjusted Return of 4.7% versus 4.1% for the average foreign large-growth offering and 3.1% for the MSCI ACWI ex USA Index (its benchmark).

Clattenburg achieved these results using the same sound and distinctive strategy that Smith employed during his 7.5-year tenure at the helm. In particular, Clattenburg has maintained the emphasis on firms with strong balance sheets, healthy free cash flows, and good growth prospects, has continued to pay ample attention to valuations, and invests in emerging-markets stocks that meet these criteria just as readily as his predecessor did.

Finally, Clattenburg has a very sizable and skilled squad of equity specialists to call on for support. This fund has a relatively modest average cost structure that gives it a leg up on most of its rivals year in and year out. And T. Rowe Price is a superior parent that has had considerable success with international-equity funds.

Fidelity Small Cap Stock Downgraded
By Susan Wasserman

Fidelity Small Cap Stock FSLCX is in the midst of a manager transition. Lead manager Lionel Harris will step off the fund in June 2018 and turn the reins over to Kip Johann-Berkel, who was named comanager in July 2017. This is Johann-Berkel's first charge, which raises uncertainty in how he will adjust the fund's process and complexion. The fund's Morningstar Analyst Rating is downgraded to Neutral from Bronze.

Prior to taking over this fund in late 2011, Harris ran Fidelity Small Cap Growth FCPGX for more than six years. On that fund, Harris focused on quality companies growing at a reasonable pace with healthy free cash flows and strong management. He applies the same process here, though his growth expectations are tempered: The fund's price/earnings ratio is below the benchmark Russell 2000 Index's and the small-blend Morningstar Category average. Although the fund's debt/capital ratio has been above the benchmark's and typical peer's at times, its average over Harris' tenure falls in line with the index and the typical peer.

Harris doesn't rely on just a few holdings to anchor the portfolio. He focuses on stock sizing, initiating positions between 50 and 100 basis points and trimming when they get too large. This tempered approach limits the impact of individual winners and losers and requires Harris to deliver solid stock-picking across the board. Harris has his strengths and weaknesses: He has outperformed the index across top sectors such as financials, industrials, and healthcare, though he has struggled with his consumer discretionary picks.

Johann-Berkel plans to keep much of Harris' process intact, though he may look for names lower in market cap. That should bring this fund's average market cap more in line with peers. Encouragingly, Johann-Berkel takes over with eight years of analyst experience under his belt and has worked closely with many of Fidelity's managers on the close-knit small-cap team.

Still, this change comes on the heels of recent middling performance. Johann-Berkel will have his work cut out for him as he is charged with delivering more-consistent results.

 

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