Value investing at the tale-end of a market rally is never easy – how do you sort the genuine bargains from the cheap-for-a-reason assets? Where the Morningstar equity rating is there to help stock pickers find undervalued stocks, fund investors can use our manager analysis to pick out OEICs and investment trusts that could be due a bounce.
Morningstar fund analysts award a Gold, Silver or Bronze rating to funds which they think will outperform their sector peers over the medium to long term. This is not a buy recommendation, it is up to the investor to decide whether they would like to add a particular asset class or geography to their portfolio. But once an individual – or their adviser – has identified an opportunity, fund ratings guide you to the best in class.
A Gold rating denotes that the analyst has the highest conviction in the fund, followed by Silver and then Bronze.
A fund’s star rating indicates how it has performed in recent history compared to the peer group average. If a fund has a five-star rating it has significantly outperformed its peers, if it has a one-star rating it has significantly underperformed.
If a top-rated fund has a one or two-star performance rating, this could be a good opportunity for long-term contrarian investors.
Investec Cautious Managed
This Silver Rated fund has just one-star performance rating. Morningstar analyst Randal Goldsmith says this fund is suitable as a core holding for patient investors who are looking for long-term real return and willing to accept periods of extreme divergence from mainstream moderate-allocation multi-asset peers. Manager Alastair Mundy is one of the United Kingdom's leading value investors with almost 30 years' investment experience.
Jupiter Merlin Income
Fund managers John Chatfeild-Roberts and Algy Smith-Maxwell’s high-conviction approach to manager selection has served investors in the Jupiter Merlin Income Portfolio well, providing them with significant outperformance of its category peers over time, says Goldsmith. It earns a Silver analyst rating, but currently has a two-star performance rating.
Aberdeen World Equity
This Silver Rated fund has a two-star performance rating. But the strength of the team and the clarity of the investment process underpinning this fund make it a strong choice for investors seeking global equity exposure, according to fund analyst Muna Abu-Habsa. The fund is managed by an experienced and well-resourced global equity team, headed by Stephen Docherty, whom the analyst team hold in high regard.
Woodford Equity Income
Despite a number of stock difficulties over the past year this fund remains one of the higher-conviction ideas in the UK equity-income space, according to fund analyst Pete Brunt. It is managed by one of the most talented fund managers in the equity-income sector at an investment boutique that focuses primarily on UK equity-income.
Here, fund manager Neil Woodford applies the same investment approach with which he created an impressively strong and consistent track record during his near three decades at Invesco Perpetual.
Old Mutual UK Alpha
Fund manager Richard Buxton is a highly experienced UK equity manager who has successfully blended bottom-up stock research with top-down macro analysis during a career that spans more than 30 years. He adopts a long-term, contrarian approach that seeks to avoid short-term trading in favour of investing in companies that appear under-priced relative to their long-term growth prospects.
