Are These Funds Naughty or Nice?
Here are some funds that might (and might not) make Santa's list.
Does your holiday stocking include a lump of coal or a diamond?
To help investors decide which investments they should cut loose and which they should hang on to as they rebalance, take tax losses, and upgrade the quality of their portfolios, we constructed two screeners. The first focuses on mutual fund diamonds in the rough: investments that are better than they look right now. The second homes in on funds that are the investment equivalent of lumps of coal--funds with a combination of poor stewardship and weak investment merit.
Diamonds in the Rough
Our first screener focuses on finding offerings that, despite their recent performance hiccups, are worth keeping for the long haul. We searched for no-load domestic-stock funds with fees below the category average. We also layered on a screen for managers with more than 10-years of experience. And to help distinguish long-term winners with short-term performance problems, we asked for funds that land in the top quartile of their categories for the 10-year period but lagged half their peers in their three-year trailing performance. To further whittle down the list, we required Morningstar Ratings of 3 stars or greater, and we only called up the distinct portfolios of funds. This screener yielded eight funds, and we highlighted two below. Premium members can click here to replicate the screen.
Selected American Shares (SLASX)
This fund is a standout steward with top marks across the board for corporate culture, board quality, manager incentives, fees, and regulatory issues. It's still playing catch-up on recouping the huge losses it incurred during the last market downturn. But management's disciplined application of its investment strategy still makes it a worthy contender for a core holding. Management focuses on solid companies whose shares are trading below their estimates of fair value, and being a stickler for strong fundamentals and reasonable valuations should pay off over time. Moreover, the fact that the fund has never trailed the S&P 500 in any rolling 10-year period since the start of the senior team members' tenure presents yet another a strong case for this fund.
Esther Pak does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.