Finding Sturdier Foreign- and World-Stock Funds
These managers typically focus on rock-solid companies.
In recent months, we've been using Morningstar's Premium Fund Screener to home in primarily on U.S. equity funds that should perform better, on a relative basis, if economic growth is slow in the coming years. The substantial growth of the global economy prior to 2008 was fueled in part by leverage taken on both by corporations and consumers, which helped bring about the ensuing financial crisis and deep recession. Now that those excesses are being wrung out and the ability to take on so much leverage is somewhat limited, many of the investment pros we talk to are predicting a "new normal" era of slower growth.
This month, we're going to use the screener to find foreign- and world-stock funds that can succeed in a world of restrained economic growth. To do that, we set the screener to seek out distinct funds in the broad international stock category that Morningstar's fund analysts cover and consider to be either core holdings or supporting players (but not niche, specialty holdings). We then narrowed the list to funds where the typical holding generated a 15% return on equity and had a debt/capital ratio lower than the category norm both last year and the year before. Such companies have solid competitive advantages and ought to be prized by investors in a slower-growth world. We also limited our search to funds with managers that had been on board for at least five years and had outpaced 75% of the fund's category rivals over that span, charged lower fees than the category norm, and could be purchased by new investors for $10,000 or less.
As of Oct. 19, 2009, the screener found six funds that met our criteria. Click here to run the screen yourself.
Greg Carlson does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.