This week, four funds earned Morningstar’s highest Gold ratings.
The Longleaf Partners Fund gets a nod from Morningstar analyst Gregg Wolper for its penchant for controversy. “Although the managers (Mason Hawkins and Staley Cates) do not buy with the intention of becoming activist investors, when they feel management of one of their holdings should follow a different course or want to provide guidance on merger decisions, they do become active,” explained Wolper.
For example: The fund’s top holding, Chesapeake Energy, has been pummeled in the media lately, according to Wolper. Various actions by its CEO, including personal loans, have brought criticism from shareholders and analysts. That along with a disappointing quarterly report have sent Chesapeake's share price tumbling. For several years, this fund's managers have strongly backed Chesapeake's CEO and the company's overall strategy. But in recent weeks their firm, Southeastern Asset Management, entered into discussions with Chesapeake's board to call for changes, some of which have been implemented.
“Whatever happens with Chesapeake or other current controversies, Hawkins' and Cates' dedication to their strategy is likely to succeed over time, but shareholders must be comfortable with their willingness to take on risks that most shun,” wrote Wolper.
Also, analyst Karin Anderson offered that investors can feel good about owning American Funds AMCAP. “Five experienced stock-pickers run separate sleeves of this large-growth fund,” she wrote.
“The fund bested the category average in 85% of all three-year rolling periods and 90% of all five-year rolling periods of the past decade. Low fees compared with other large-cap funds bolster this fund's case.”
Interested in real estate? Then the T. Rowe Price Real Estate is an easy choice for long-term real estate exposure, according to analyst Rob Wherry.
“This fund's performance has kept pace with the real estate sector's recent rally. Its 3.3% gain for the year to date through Nov. 9 beats the S&P 500 Index by almost 4 percentage points and is on par with the 3.2% gain of Vanguard REIT Index VGSIX (a reasonable proxy for the real estate sector),” he wrote.
Finally, analyst Sarah Bush lauds the Fidelity GNMA fund’s co-managers Bill Irving and Franco Castagliuolo for avoiding stakes in non-government debt and complex derivative securities that sometimes pop up in competitors' portfolios.
“Instead, the pair sticks to a no-frills approach, seeking out undervalued segments of the Ginnie Mae market, all while keeping a close eye trained on prepayment Risk,” she wrote.
The fund has returned some 7% for each of the past four calendar years and 6.7% year-to- date through September.