The Most Unloved Medalists of 2014
Should investors be showing these funds more love?
The quantitative Morningstar Rating for Funds, or the star rating, often correlates with fund flows. Morningstar's qualitative Analyst Ratings, however, don't always move in the same direction as sales. Frequently, but not always, when investors seem to be selling funds, our analysts will maintain Gold, Silver, or Bronze ratings on them. We try not to be reflexive contrarians and to judge each fund on its own merits, using their people, process, parent, performance, and price as our guides. To help illustrate, here is a look at 2014's 10 most unpopular U.S.-based mutual funds with Morningstar Analyst Ratings, in terms of net outflows and what Morningstar analysts currently think of them.
Gross Changes
Half of the funds on the list are from PIMCO. That's not surprising given that chief investment officer Bill Gross split with the firm he founded in a high-profile snit in September 2014. His
Despite Gross' departure and increasing outflows, though, Morningstar still recommends the fund, albeit with a lower level of conviction. Its Analyst Rating dropped from Gold because of the upheaval, but still merits a Bronze rating because accomplished managers have stepped in for Gross and the firm still has deep resources. You can say the same for
Morningstar maintains the same level of conviction in
The future's a bit more uncertain for
Transfer Stations
Fidelity Investments had two funds on the unpopular list--
It would not be surprising if both funds had been seeing at least some real outflows, though. Fidelity Contrafund has been in a slump in recent years, and Fidelity Growth Company is closed to new investors. Both funds, however, retain their Silver Analyst Ratings because they have very experienced managers with time-tested stock-picking approaches that have produced very strong results over the long term. Will Danoff's more-than 13% annualized gain at Fidelity Contrafund from his September 1990 start through Jan. 21, 2015, trounces the nearly 9.0% gain of the average large-growth fund, the 9.6% gain of the Russell 1000 Growth Index, and the 10.2% gain of the S&P 500 Index. Similarly, Steve Wymer's 10% annualized gain from his January 1997 start at Fidelity Growth Company through the same date beats the Russell 1000 Growth and typical large-growth fund by more than 3 percentage points and the S&P 500 by more than 2.
Turning Tables Each of the last three funds on the list had been big sellers earlier in the 2000s, only to see their fortunes reverse in more recent years.
Slumping performance and some management changes probably are behind
It's been quite a turn of events for
For a list of the open-end funds we cover, click here. For a list of the closed-end funds we cover, click here. For a list of the exchange-traded funds we cover, click here. For information on the Morningstar Analyst Ratings, click here.