Morningstar Advisor - December/January 2012 - (Page 20)

Investments à la Carte Four Picks for the Present Stock: 3M MMM Fair Value Estimate $100 Morningstar Rating Uncertainty Low Economic Moat Wide Credit Rating AA QQQQQ 1-Year Stock Price Compared With Fair Value Estimate 120 100 80 10/28/10 Daily stock price Fair value estimate 3/28/11 8/29/11 3M has invented some of the world’s greatest products. We think that the firm’s innovative culture, bottom-line-focus, and low-cost Fair Value Daily manufacturing have carved a wide moat around Daily Closing Price its business that will enable the company to reap outsized rewards over the long run. Although 3M sells thousands of products to disparate end markets, the firm cites only a few dozen technological pillars that support its wide array of offerings. Recent economic headwinds challenged this profitability because of the firm’s inherent operating leverage, but we think 3M handled the 2008–09 recession admirably, reducing working capital to increase free cash 120 flow while remaining economically profitable. Adam Fleck 100 9/28/11 10/27/11 6/28/11 2/28/11 Mutual Fund: Litman Gregory Masters Value MSVFX 1/28/11 4/28/11 Category 4 Large Blend Asset Allocation Cash US Stock Non US Stock Bond Other 11/29/10 12/28/10 5/27/11 7/28/11 80 Morningstar Rating QQQ Total Assets $86.8 million Expenses 1.37% Turnover 8.8% 60 10/28/10 11/29/10 1/28/11 3/28/11 5/27/11 7/28/11 9/28/1 12/28/10 2/28/11 4/28/11 6/28/11 8/29/11 10 –100 –50 0 50 100 This fund’s portfolio comprises the nine to 15 best ideas of four proven subadvisors. That should have been a winning formula, particularly with Bill Nygren of Oakmark Select OAKLX, Mason Hawkins of Longleaf Partners LLPFX, and a team from Mutual Series on board since the fund’s 2000 inception. However, the struggles of the fourth manager, Bill Miller of Legg Mason, in 2007 and 2008 put a big dent in the fund’s record. Miller was canned in 2008 in favor of Clyde McGregor of Oakmark OAKBX. At the time, the fund Equity & Income120 had lagged the Russell 3000 Value Index since inception. Since100 it’s trounced the index then, as well as its typical large-value peer. The fund is a fine long-term holding. Greg Carlson 80 60 11/18/101/19/113/15/11 5/5/11 6/28/118/22/1110/18/11 11/19/101/20/113/16/11 5/11/11 7/5/118/23/1110/19/11 11/22/101/21/113/17/115/6/11 6/29/118/24/1110/20/11 11/23/101/24/113/18/115/12/11 7/11/118/31/1110/27/1 11/24/101/25/113/21/115/9/11 6/30/118/25/1110/21/1 11/26/101/26/113/22/115/13/11 7/6/11 8/26/1110/24/1 11/29/101/27/113/23/115/16/11 7/12/11 9/1/1110/25/1 11/30/101/28/113/24/115/17/117/7/11 8/29/1110/26/1 12/1/10 1/31/113/25/115/18/117/13/11 9/2/11 12/2/10 2/1/11 3/28/115/19/117/8/11 8/30/11 12/3/10 2/2/11 3/29/115/20/117/14/11 9/6/11 12/6/10 2/3/11 3/30/115/23/117/15/11 9/12/11 12/10/102/4/11 3/31/115/24/117/18/11 9/7/11 12/7/10 2/10/114/1/11 5/25/117/19/119/13/11 12/13/102/7/11 4/4/11 5/26/117/20/119/8/11 12/8/10 2/11/11 4/5/11 5/27/117/21/119/9/11 12/14/102/8/11 4/11/116/1/11 7/26/119/16/11 12/9/10 2/14/11 4/6/11 5/31/11 7/27/11 9/26/11 12/15/102/9/11 4/12/116/2/11 7/28/11 9/27/11 12/16/102/15/11 4/7/11 6/7/11 7/29/11 9/28/11 12/17/102/16/114/13/11 6/8/11 8/8/11 9/29/11 12/20/102/17/114/8/11 6/9/11 8/9/11 9/30/11 12/21/102/18/11 12/22/10 12/23/10 12/27/10 10/5/11 10/6/11 10/7/11 10/28/1012/29/102/25/114/19/116/13/118/1/119/19/11 10/29/1012/30/102/28/114/20/116/14/118/2/119/20/11 11/1/1012/28/102/24/114/18/116/10/11 8/3/119/21/11 11/2/1012/31/10 3/1/11 4/21/116/15/118/4/119/22/11 11/3/10 1/3/112/22/114/14/116/3/117/22/119/14/11 11/4/10 1/4/112/23/114/15/116/6/117/25/119/15/11 11/10/101/10/113/2/11 4/25/116/16/118/10/1110/3/11 11/5/10 1/5/11 3/3/11 4/26/116/17/118/5/119/23/11 11/11/101/11/11 3/4/11 4/27/116/20/118/11/1110/4/11 11/8/10 1/6/11 3/10/11 5/2/116/21/118/12/1110/10/11 11/12/101/12/11 3/7/11 4/28/116/22/118/15/1110/11/11 11/9/10 1/7/11 3/11/11 5/3/11 6/23/118/16/1110/12/11 11/15/101/13/11 3/8/11 4/29/11 6/24/118/17/1110/13/11 11/16/101/14/113/14/11 5/4/11 6/27/118/18/1110/14/11 11/17/101/18/113/9/11 5/10/11 7/1/118/19/1110/17/11 Separate Account: Leuthold Weeden Core Investments Category Moderate Allocation Asset Allocation Cash US Stock Non US Stock Bond Other Total Number of Holdings 61 P/B Ratio 1.98 U.S. Stocks 65.64% Net Assets $1.771 billion Assets in Top 10 Holdings 39.55% –100 –50 0 50 100 Economic growth is muted in the biggest markets, and smaller corners of the market could end up delivering better returns, so a wide-ranging asset-allocation strategy may be just the ticket. Leuthold Weeden runs one of the best around. It has generated fine long-term returns while owning U.S. equities and bonds, emerging-markets stocks, foreign sovereign debt, gold bullion, and cash. The fund will also dramatically alter its stock/bond mix depending on the macroeconomic forecasts of the management team and its quant models. Firm founder Steve Leuthold recently stepped down from his CIO and portfolio-manager roles, but he’ll still be quite involved in the investment process. Greg Carlson 20 Morningstar Advisor December/January 2012

Table of Contents for the Digital Edition of Morningstar Advisor - December/January 2012

Morningstar Advisor - December/January 2012
Contents
Contributors
Letter From the Editor
Seduced by Complexity
Is China Exposure Important for a Portfolio?
A Niche Built on Trust
How to Find Your Client’s Investment Style
Taking the Long View
Consensus on Europe Elusive
Four Picks for the Present
Investment Briefs
Is Perception Reality for Active Managers?
Be Alert for Basic-Materials Bargains
Investment Boom Unsustainable
Digging Moats in China
Where China’s Domestic Companies Stand to Benefit
Arising Opportunities
China Strong Long Term
From Currency Manipulation to International Acceptance
The Keys to China’s Fortune
Wedgewood’s Lessons Pay Off
Reading the Evidence on Indexing
Scouting for Investments Abroad
Yield, Please (Hold the Europe)
Mutual Fund Analyst Picks
50 Most Popular ETFs
Undervalued Stocks With Wide Moats
China Fund Managers Eat Elsewhere

Morningstar Advisor - December/January 2012