The past year was even rougher for international funds than it was for those centered on the battered U.S. market. While the S&P 500 ended a tumultuous year ahead by 2.1%, foreign markets weren't so fortunate. Most ended up deep in the red, owing to the more direct impact of the eurozone crisis and worries about slowing growth and rising inflation in emerging markets. The effect of weak foreign currencies, when fund returns were translated into dollars for U.S.-based investors, exacerbated matters.
Across the board, foreign-focused categories suffered much deeper losses than U.S.-focused categories did. For example, the foreign large-blend group lost 14% while the domestic large-blend category dropped just 1.3%, and the diversified emerging-markets category plunged 19.9%, more than any domestic group. (The worst U.S. category was the narrowly focused financials-sector category, with a loss of 15.1%.)
Amidst the gloom, though, a light was shining, The glow of a match, one might say, held to the tip of a cigarette. Tobacco stocks, those most reviled of companies in some times and in some quarters, posted strong gains while almost everything else was falling. Managers who owned them in bulk reaped the benefits. When you look at the top international funds of 2011, don't be surprised if you smell smoke.
No Passing Fancy For the most part, the managers with substantial weightings in tobacco-related stocks were not simply running for cover, shifting to defensive stocks in a year when riskier options were getting pounded by investors. Most of these managers have had a liking for tobacco, so to speak, for many years.
A prominent example is the team at the helm of Tweedy, Browne Global Value , who recently won the Morningstar International Fund Manager of the Year award for 2011. In the fund's September 2011 portfolio, Philip Morris International displayPTip('PM', 'PM','YTD', '', '', '', '', '', '','msg','P'); was the second largest holding, at 4% of assets, and British American Tobacco (also known as BAT) displayPTip('BTI', 'BTI','YTD', '', '', '', '', '', '','msg','P'); was at 2%. Philip Morris rose almost 40% in 2011, and BAT climbed 27%. A smaller position in Imperial Tobacco rose sharply as well. Who said such stocks were stodgy fare?
In a recent interview with Morningstar, the managers of the fund explained what they liked about Philip Morris. Most notably, they pointed to its popular brands, its exposure to emerging markets, and the fact that litigation is much less of a risk outside the United States. In addition, comanager Will Browne praised the decisions made by the company's executives, noting, "they've been great allocators of capital."
With stock markets hit so hard in 2011, the performances of those stocks couldn't keep Tweedy, Browne Global Value's 2011 return in the black. But they did push the fund into the top decile of the foreign large-value category. Its loss was nearly 9 percentage points milder than the category average.
David Winters of Wintergreen displayPTip('WGRNX', 'WGRNX','YTD', '', '', '', '', '', '','msg','P'); has an even deeper connection with this area. Winters has long had huge stakes in tobacco companies, largely because of their powerful, consistent cash flows and the fact they can raise prices more easily than firms in many other fields. In Wintergreen's September 2011 portfolio, Philip Morris International and BAT together made up about 9% of assets, while two other tobacco firms, Reynolds American displayPTip('RAI', 'RAI','YTD', '', '', '', '', '', '','msg','P'); and Imperial Tobacco, took up around 8% combined. Those stocks soared just as Philip Morris and BAT did. (The fund also owned Japan Tobacco for part of the year.) No wonder Wintergreen beat 90% of its world-stock category rivals last year, posting a slight gain while its typical peer suffered a 7.9% loss.
Rajiv Jain of Virtus Foreign Opportunities displayPTip('JVIAX', 'JVIAX','YTD', '', '', '', '', '', '','msg','P'); is one of the few managers who can rival Winters in his devotion to tobacco stocks. The Virtus fund's September portfolio boasted four tobacco companies in its top-eight holdings, totaling nearly 20% of the fund's assets. Along with Philip Morris, BAT, and Imperial, this fund owns ITC, an India-domiciled and India-focused tobacco firm that also posted a nice gain in 2011. Jain likes that company because it dominates the local cigarette market, which is growing. More generally, he is drawn to tobacco companies because of their steady growth, strong market shares, and high dividends, along with their exposure to emerging markets.
The Tweedy, Wintergreen, and Virtus funds weren't the only ones to have their returns boosted by tobacco stocks in 2011. Among the relative handful of others that felt a significant impact was Morgan Stanley Institutional Global Franchise displayPTip('MSFAX', 'MSFAX','YTD', '', '', '', '', '', '','msg','P');. Its 9.4% gain in 2011 owed much to tobacco. In fact, BAT, Imperial Tobacco, and Philip Morris International all sat in its top five at the end of 2011, taking up 21% of assets. Several offerings from Mutual Series, as well as Pimco EqS Pathfinder displayPTip('PATHX', 'PATHX','YTD', '', '', '', '', '', '','msg','P');, could also thank tobacco firms, in part, for their 2011 showings.
More to the Story Of course, tobacco stocks alone don't explain these funds' showings in 2011. Most also had substantial stakes in other consumer-oriented companies, such as beverage makers or distributors or household-goods companies, and on the whole those types of stocks also held up well last year. Moreover, it's worth noting that even though these managers have owned tobacco stocks a long time and have faith in their long-range prospects, that doesn't mean such firms will consistently outperform as they did in 2011. The circumstances were unusual, to say the least. When investors are willing to take on more risk, such stocks likely won't be as much in demand. (The first month of 2012 provides an example.)
Readers thus should not take this as a recommendation to pursue funds with big tobacco stakes (or to go out and buy tobacco stocks). Rather, the point is to show how unpopular or unexciting companies, the type that can have fund shareholders wondering if the manager is asleep at the switch, can eventually prove to be very valuable indeed.
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Securities mentioned in this article Ticker Price($) Change(%) Morningstar Rating Morningstar Analyst Report With Morningstar Analyst reports you can get our expert Buy/Sell opinions on over 3,900 Stock and Funds Gregg Wolper does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies. Video Reports Amodeo: Long-Dated Bonds Best... More Videos... Most Popular Related News Also in Fund Spy Chuck Akre on the Search for Compounding MachinesFine Fund, Lousy Year Sponsored Links Buy a Link Now Sponsor Center Please Wait... MUTUALFUNDS USA_PM,USA_JVIAX,USA_TBGVX,USA_RAI,USA_BTI,USA_PATHX,USA_MSFAX,USA_WGRNX E0_USA_PM FO_USA_JVIAX FO_USA_TBGVX E0_USA_RAI E0_USA_BTI FO_USA_PATHX FO_USA_MSFAX FO_USA_WGRNX &primaryKeyword=MUTUALFUNDS 2 {CommentWebService} .bloomreach-wrap a { color: #000000; text-decoration: none; } .bloomreach-wrap a:hover{ text-decoration: underline; } .bloomreach-wrap { text-align:left; padding-left:5px; margin:15px 0px 0px 4px; padding-top:15px; width: 370px; } .br-related-heading, .br-related-query, .br-found-heading, .br-sf-widget { border-bottom: 1px solid #CCCCCC; font-size: 11px; line-height: 15px; padding: 5px 0 5px; } .br-related-heading, .br-found-heading { border-top: 2px solid #999999; font-weight: bold; padding: 2px 0 7px; color:#333333; } .br-found-heading { margin-top:30px; } .br-sf-widget-merchant-desc { color: #999999; padding-top:6px; } var br_related_rid = "Rl3llnfqaf8q1i508l0kf-uf,r0,m0"; $(".br-sf-widget-merchant-qv").remove(); $(".br-sf-widget-merchant-img").remove(); $(".br-sf-widget").next("div[id^='br']").remove(); if($(".bloomreach-wrap #BloomreachWidgetProxy").length>0){ $(".bloomreach-wrap #BloomreachWidgetProxy").css("display","block"); } else{ if($("#BloomreachWidget").length>0){ document.getElementById("BloomreachWidget").innerHTML=$("#BloomreachWidgetProxy").html(); $("#BloomreachWidgetProxy").remove(); } } .br-related-heading, .br-found-heading { border-top: 3px solid #666666; font-weight: bold; font-size:10px; padding: 2px 0 7px; color:#000000; } OAS_AD('Bottom'); Content Partners Site Directory Site Map Our Products Corrections Help Advertising Opportunities Licensing Opportunities Glossary RSS Mobile Portfolio Affiliate Careers Company News International Sites: Australia Canada China France Germany Hong Kong Italy The Netherlands Norway Spain U.K. Switzerland Independent. Insightful. Trusted. Morningstar provides stock market analysis; equity, mutual fund, and ETF research, ratings, and picks; portfolio tools; and option, hedge fund, IRA, 401k, and 529 plan research. Our reliable data and analysis can help both experienced enthusiasts and newcomers. © Copyright 2012 Morningstar, Inc. All rights reserved. Please read our Terms of Useand Privacy Policy.Dow Jones Industrial Average, S&P 500, Nasdaq, and Morningstar Index (Market Barometer) quotes are real-time. var HeaderBox = initBoxQuote("AutoCompleteBox","AutoCompleteDropDown"); HeaderBox.IdleDisplayMsg = ""; HeaderBox.LocalRegion="USA"; HeaderBox.SetPreference('USA','EN',32); var FooterBox = initBoxQuote("AutoCompleteBoxFooter","AutoCompleteDropDownFooter"); FooterBox.IdleDisplayMsg = ""; FooterBox.LocalRegion="USA"; FooterBox.SetPreference('USA','EN',32); //clears all content/image boxes-------------------------------------------------------------------------------------- var imageIDs=new Array('siteDirectoryContent', 'siteMapContent', 'productsContent'); //content boxes .mi_row3{display: none} var _gaq = _gaq || []; _gaq.push(['_setAccount', 'UA-16669347-1']); _gaq.push(['_setDomainName', '.morningstar.com']); _gaq.push(['_trackPageview']); (function() { var ga = document.createElement('script'); ga.type = 'text/javascript'; ga.async = true; ga.src = ('https:' == document.location.protocol ? 'https://ssl' : 'http://www') + '.google-analytics.com/ga.js'; var s = document.getElementsByTagName('script')[0]; s.parentNode.insertBefore(ga, s); })(); var Name = $('meta[name=DC.Creator]').attr("content").split(','); var Title = $('meta[name=DC.Title]').attr("content"); var URL = window.location.href; var Author = Name[1] + " " + Name[0]; var PubDate = $('meta[name=DC.Date]').attr("content"); _gaq.push(['_trackEvent', 'Article Title From Morningstar', Title, URL]); _gaq.push(['_trackEvent', 'Author Name From Morningstar', Author, URL]); _gaq.push(['_trackEvent', 'Article URL From Morningstar', URL, Title + "(by " + Author + " on " + PubDate + ")"]); _gaq.push(['_trackEvent', 'Publish Date From Morningstar', PubDate, URL]); _gaq.push(['_trackEvent', 'Article Title', Title, URL]); _gaq.push(['_trackEvent', 'Author Name', Author, URL]); _gaq.push(['_trackEvent', 'Article URL', URL, Title + "(by " + Author + " on " + PubDate + ")"]); _gaq.push(['_trackEvent', 'Publish Date', PubDate, URL]);In a recent interview with Morningstar, the managers of the fund explained what they liked about Philip Morris. Most notably, they pointed to its popular brands, its exposure to emerging markets, and the fact that litigation is much less of a risk outside the United States. In addition, comanager Will Browne praised the decisions made by the company's executives, noting, "they've been great allocators of capital."
With stock markets hit so hard in 2011, the performances of those stocks couldn't keep Tweedy, Browne Global Value's 2011 return in the black. But they did push the fund into the top decile of the foreign large-value category. Its loss was nearly 9 percentage points milder than the category average.
David Winters of Wintergreen has an even deeper connection with this area. Winters has long had huge stakes in tobacco companies, largely because of their powerful, consistent cash flows and the fact they can raise prices more easily than firms in many other fields. In Wintergreen's September 2011 portfolio, Philip Morris International and BAT together made up about 9% of assets, while two other tobacco firms, Reynolds American displayPTip('RAI', 'RAI','YTD', '', '', '', '', '', '','msg','P'); and Imperial Tobacco, took up around 8% combined. Those stocks soared just as Philip Morris and BAT did. (The fund also owned Japan Tobacco for part of the year.) No wonder Wintergreen beat 90% of its world-stock category rivals last year, posting a slight gain while its typical peer suffered a 7.9% loss.
Rajiv Jain of Virtus Foreign Opportunities displayPTip('JVIAX', 'JVIAX','YTD', '', '', '', '', '', '','msg','P'); is one of the few managers who can rival Winters in his devotion to tobacco stocks. The Virtus fund's September portfolio boasted four tobacco companies in its top-eight holdings, totaling nearly 20% of the fund's assets. Along with Philip Morris, BAT, and Imperial, this fund owns ITC, an India-domiciled and India-focused tobacco firm that also posted a nice gain in 2011. Jain likes that company because it dominates the local cigarette market, which is growing. More generally, he is drawn to tobacco companies because of their steady growth, strong market shares, and high dividends, along with their exposure to emerging markets.
The Tweedy, Wintergreen, and Virtus funds weren't the only ones to have their returns boosted by tobacco stocks in 2011. Among the relative handful of others that felt a significant impact was Morgan Stanley Institutional Global Franchise displayPTip('MSFAX', 'MSFAX','YTD', '', '', '', '', '', '','msg','P');. Its 9.4% gain in 2011 owed much to tobacco. In fact, BAT, Imperial Tobacco, and Philip Morris International all sat in its top five at the end of 2011, taking up 21% of assets. Several offerings from Mutual Series, as well as Pimco EqS Pathfinder displayPTip('PATHX', 'PATHX','YTD', '', '', '', '', '', '','msg','P');, could also thank tobacco firms, in part, for their 2011 showings.
More to the Story Of course, tobacco stocks alone don't explain these funds' showings in 2011. Most also had substantial stakes in other consumer-oriented companies, such as beverage makers or distributors or household-goods companies, and on the whole those types of stocks also held up well last year. Moreover, it's worth noting that even though these managers have owned tobacco stocks a long time and have faith in their long-range prospects, that doesn't mean such firms will consistently outperform as they did in 2011. The circumstances were unusual, to say the least. When investors are willing to take on more risk, such stocks likely won't be as much in demand. (The first month of 2012 provides an example.)
Readers thus should not take this as a recommendation to pursue funds with big tobacco stakes (or to go out and buy tobacco stocks). Rather, the point is to show how unpopular or unexciting companies, the type that can have fund shareholders wondering if the manager is asleep at the switch, can eventually prove to be very valuable indeed.
Return to Discuss
Be Seen. Be Heard. Become a Morningstar Contributor.Reach a readership of advisors, professionals, and active investors. Submit your commentaries for publication on Morningstar.com.
Securities mentioned in this article Ticker Price($) Change(%) Morningstar Rating Morningstar Analyst Report With Morningstar Analyst reports you can get our expert Buy/Sell opinions on over 3,900 Stock and Funds Gregg Wolper does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies. Video Reports Amodeo: Long-Dated Bonds Best... More Videos... Most Popular Related News Also in Fund Spy Chuck Akre on the Search for Compounding MachinesFine Fund, Lousy Year Sponsored Links Buy a Link Now Sponsor Center Please Wait... MUTUALFUNDS USA_PM,USA_JVIAX,USA_TBGVX,USA_RAI,USA_BTI,USA_PATHX,USA_MSFAX,USA_WGRNX E0_USA_PM FO_USA_JVIAX FO_USA_TBGVX E0_USA_RAI E0_USA_BTI FO_USA_PATHX FO_USA_MSFAX FO_USA_WGRNX &primaryKeyword=MUTUALFUNDS 2 {CommentWebService} .bloomreach-wrap a { color: #000000; text-decoration: none; } .bloomreach-wrap a:hover{ text-decoration: underline; } .bloomreach-wrap { text-align:left; padding-left:5px; margin:15px 0px 0px 4px; padding-top:15px; width: 370px; } .br-related-heading, .br-related-query, .br-found-heading, .br-sf-widget { border-bottom: 1px solid #CCCCCC; font-size: 11px; line-height: 15px; padding: 5px 0 5px; } .br-related-heading, .br-found-heading { border-top: 2px solid #999999; font-weight: bold; padding: 2px 0 7px; color:#333333; } .br-found-heading { margin-top:30px; } .br-sf-widget-merchant-desc { color: #999999; padding-top:6px; } var br_related_rid = "Rl3llnfqaf8q1i508l0kf-uf,r0,m0"; $(".br-sf-widget-merchant-qv").remove(); $(".br-sf-widget-merchant-img").remove(); $(".br-sf-widget").next("div[id^='br']").remove(); if($(".bloomreach-wrap #BloomreachWidgetProxy").length>0){ $(".bloomreach-wrap #BloomreachWidgetProxy").css("display","block"); } else{ if($("#BloomreachWidget").length>0){ document.getElementById("BloomreachWidget").innerHTML=$("#BloomreachWidgetProxy").html(); $("#BloomreachWidgetProxy").remove(); } } .br-related-heading, .br-found-heading { border-top: 3px solid #666666; font-weight: bold; font-size:10px; padding: 2px 0 7px; color:#000000; } OAS_AD('Bottom'); Content Partners Site Directory Site Map Our Products Corrections Help Advertising Opportunities Licensing Opportunities Glossary RSS Mobile Portfolio Affiliate Careers Company News International Sites: Australia Canada China France Germany Hong Kong Italy The Netherlands Norway Spain U.K. Switzerland Independent. Insightful. Trusted. Morningstar provides stock market analysis; equity, mutual fund, and ETF research, ratings, and picks; portfolio tools; and option, hedge fund, IRA, 401k, and 529 plan research. Our reliable data and analysis can help both experienced enthusiasts and newcomers. © Copyright 2012 Morningstar, Inc. All rights reserved. Please read our Terms of Useand Privacy Policy.Dow Jones Industrial Average, S&P 500, Nasdaq, and Morningstar Index (Market Barometer) quotes are real-time. var HeaderBox = initBoxQuote("AutoCompleteBox","AutoCompleteDropDown"); HeaderBox.IdleDisplayMsg = ""; HeaderBox.LocalRegion="USA"; HeaderBox.SetPreference('USA','EN',32); var FooterBox = initBoxQuote("AutoCompleteBoxFooter","AutoCompleteDropDownFooter"); FooterBox.IdleDisplayMsg = ""; FooterBox.LocalRegion="USA"; FooterBox.SetPreference('USA','EN',32); //clears all content/image boxes-------------------------------------------------------------------------------------- var imageIDs=new Array('siteDirectoryContent', 'siteMapContent', 'productsContent'); //content boxes .mi_row3{display: none} var _gaq = _gaq || []; _gaq.push(['_setAccount', 'UA-16669347-1']); _gaq.push(['_setDomainName', '.morningstar.com']); _gaq.push(['_trackPageview']); (function() { var ga = document.createElement('script'); ga.type = 'text/javascript'; ga.async = true; ga.src = ('https:' == document.location.protocol ? 'https://ssl' : 'http://www') + '.google-analytics.com/ga.js'; var s = document.getElementsByTagName('script')[0]; s.parentNode.insertBefore(ga, s); })(); var Name = $('meta[name=DC.Creator]').attr("content").split(','); var Title = $('meta[name=DC.Title]').attr("content"); var URL = window.location.href; var Author = Name[1] + " " + Name[0]; var PubDate = $('meta[name=DC.Date]').attr("content"); _gaq.push(['_trackEvent', 'Article Title From Morningstar', Title, URL]); _gaq.push(['_trackEvent', 'Author Name From Morningstar', Author, URL]); _gaq.push(['_trackEvent', 'Article URL From Morningstar', URL, Title + "(by " + Author + " on " + PubDate + ")"]); _gaq.push(['_trackEvent', 'Publish Date From Morningstar', PubDate, URL]); _gaq.push(['_trackEvent', 'Article Title', Title, URL]); _gaq.push(['_trackEvent', 'Author Name', Author, URL]); _gaq.push(['_trackEvent', 'Article URL', URL, Title + "(by " + Author + " on " + PubDate + ")"]); _gaq.push(['_trackEvent', 'Publish Date', PubDate, URL]);Rajiv Jain of Virtus Foreign Opportunities is one of the few managers who can rival Winters in his devotion to tobacco stocks. The Virtus fund's September portfolio boasted four tobacco companies in its top-eight holdings, totaling nearly 20% of the fund's assets. Along with Philip Morris, BAT, and Imperial, this fund owns ITC, an India-domiciled and India-focused tobacco firm that also posted a nice gain in 2011. Jain likes that company because it dominates the local cigarette market, which is growing. More generally, he is drawn to tobacco companies because of their steady growth, strong market shares, and high dividends, along with their exposure to emerging markets.
The Tweedy, Wintergreen, and Virtus funds weren't the only ones to have their returns boosted by tobacco stocks in 2011. Among the relative handful of others that felt a significant impact was Morgan Stanley Institutional Global Franchise displayPTip('MSFAX', 'MSFAX','YTD', '', '', '', '', '', '','msg','P');. Its 9.4% gain in 2011 owed much to tobacco. In fact, BAT, Imperial Tobacco, and Philip Morris International all sat in its top five at the end of 2011, taking up 21% of assets. Several offerings from Mutual Series, as well as Pimco EqS Pathfinder displayPTip('PATHX', 'PATHX','YTD', '', '', '', '', '', '','msg','P');, could also thank tobacco firms, in part, for their 2011 showings.
More to the Story Of course, tobacco stocks alone don't explain these funds' showings in 2011. Most also had substantial stakes in other consumer-oriented companies, such as beverage makers or distributors or household-goods companies, and on the whole those types of stocks also held up well last year. Moreover, it's worth noting that even though these managers have owned tobacco stocks a long time and have faith in their long-range prospects, that doesn't mean such firms will consistently outperform as they did in 2011. The circumstances were unusual, to say the least. When investors are willing to take on more risk, such stocks likely won't be as much in demand. (The first month of 2012 provides an example.)
Readers thus should not take this as a recommendation to pursue funds with big tobacco stakes (or to go out and buy tobacco stocks). Rather, the point is to show how unpopular or unexciting companies, the type that can have fund shareholders wondering if the manager is asleep at the switch, can eventually prove to be very valuable indeed.
Return to Discuss
Be Seen. Be Heard. Become a Morningstar Contributor.Reach a readership of advisors, professionals, and active investors. Submit your commentaries for publication on Morningstar.com.
Securities mentioned in this article Ticker Price($) Change(%) Morningstar Rating Morningstar Analyst Report With Morningstar Analyst reports you can get our expert Buy/Sell opinions on over 3,900 Stock and Funds Gregg Wolper does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies. Video Reports Amodeo: Long-Dated Bonds Best... More Videos... Most Popular Related News Also in Fund Spy Chuck Akre on the Search for Compounding MachinesFine Fund, Lousy Year Sponsored Links Buy a Link Now Sponsor Center Please Wait... MUTUALFUNDS USA_PM,USA_JVIAX,USA_TBGVX,USA_RAI,USA_BTI,USA_PATHX,USA_MSFAX,USA_WGRNX E0_USA_PM FO_USA_JVIAX FO_USA_TBGVX E0_USA_RAI E0_USA_BTI FO_USA_PATHX FO_USA_MSFAX FO_USA_WGRNX &primaryKeyword=MUTUALFUNDS 2 {CommentWebService} .bloomreach-wrap a { color: #000000; text-decoration: none; } .bloomreach-wrap a:hover{ text-decoration: underline; } .bloomreach-wrap { text-align:left; padding-left:5px; margin:15px 0px 0px 4px; padding-top:15px; width: 370px; } .br-related-heading, .br-related-query, .br-found-heading, .br-sf-widget { border-bottom: 1px solid #CCCCCC; font-size: 11px; line-height: 15px; padding: 5px 0 5px; } .br-related-heading, .br-found-heading { border-top: 2px solid #999999; font-weight: bold; padding: 2px 0 7px; color:#333333; } .br-found-heading { margin-top:30px; } .br-sf-widget-merchant-desc { color: #999999; padding-top:6px; } var br_related_rid = "Rl3llnfqaf8q1i508l0kf-uf,r0,m0"; $(".br-sf-widget-merchant-qv").remove(); $(".br-sf-widget-merchant-img").remove(); $(".br-sf-widget").next("div[id^='br']").remove(); if($(".bloomreach-wrap #BloomreachWidgetProxy").length>0){ $(".bloomreach-wrap #BloomreachWidgetProxy").css("display","block"); } else{ if($("#BloomreachWidget").length>0){ document.getElementById("BloomreachWidget").innerHTML=$("#BloomreachWidgetProxy").html(); $("#BloomreachWidgetProxy").remove(); } } .br-related-heading, .br-found-heading { border-top: 3px solid #666666; font-weight: bold; font-size:10px; padding: 2px 0 7px; color:#000000; } OAS_AD('Bottom'); Content Partners Site Directory Site Map Our Products Corrections Help Advertising Opportunities Licensing Opportunities Glossary RSS Mobile Portfolio Affiliate Careers Company News International Sites: Australia Canada China France Germany Hong Kong Italy The Netherlands Norway Spain U.K. Switzerland Independent. Insightful. Trusted. Morningstar provides stock market analysis; equity, mutual fund, and ETF research, ratings, and picks; portfolio tools; and option, hedge fund, IRA, 401k, and 529 plan research. Our reliable data and analysis can help both experienced enthusiasts and newcomers. © Copyright 2012 Morningstar, Inc. All rights reserved. Please read our Terms of Useand Privacy Policy.Dow Jones Industrial Average, S&P 500, Nasdaq, and Morningstar Index (Market Barometer) quotes are real-time. var HeaderBox = initBoxQuote("AutoCompleteBox","AutoCompleteDropDown"); HeaderBox.IdleDisplayMsg = ""; HeaderBox.LocalRegion="USA"; HeaderBox.SetPreference('USA','EN',32); var FooterBox = initBoxQuote("AutoCompleteBoxFooter","AutoCompleteDropDownFooter"); FooterBox.IdleDisplayMsg = ""; FooterBox.LocalRegion="USA"; FooterBox.SetPreference('USA','EN',32); //clears all content/image boxes-------------------------------------------------------------------------------------- var imageIDs=new Array('siteDirectoryContent', 'siteMapContent', 'productsContent'); //content boxes .mi_row3{display: none} var _gaq = _gaq || []; _gaq.push(['_setAccount', 'UA-16669347-1']); _gaq.push(['_setDomainName', '.morningstar.com']); _gaq.push(['_trackPageview']); (function() { var ga = document.createElement('script'); ga.type = 'text/javascript'; ga.async = true; ga.src = ('https:' == document.location.protocol ? 'https://ssl' : 'http://www') + '.google-analytics.com/ga.js'; var s = document.getElementsByTagName('script')[0]; s.parentNode.insertBefore(ga, s); })(); var Name = $('meta[name=DC.Creator]').attr("content").split(','); var Title = $('meta[name=DC.Title]').attr("content"); var URL = window.location.href; var Author = Name[1] + " " + Name[0]; var PubDate = $('meta[name=DC.Date]').attr("content"); _gaq.push(['_trackEvent', 'Article Title From Morningstar', Title, URL]); _gaq.push(['_trackEvent', 'Author Name From Morningstar', Author, URL]); _gaq.push(['_trackEvent', 'Article URL From Morningstar', URL, Title + "(by " + Author + " on " + PubDate + ")"]); _gaq.push(['_trackEvent', 'Publish Date From Morningstar', PubDate, URL]); _gaq.push(['_trackEvent', 'Article Title', Title, URL]); _gaq.push(['_trackEvent', 'Author Name', Author, URL]); _gaq.push(['_trackEvent', 'Article URL', URL, Title + "(by " + Author + " on " + PubDate + ")"]); _gaq.push(['_trackEvent', 'Publish Date', PubDate, URL]);The Tweedy, Wintergreen, and Virtus funds weren't the only ones to have their returns boosted by tobacco stocks in 2011. Among the relative handful of others that felt a significant impact was Morgan Stanley Institutional Global Franchise . Its 9.4% gain in 2011 owed much to tobacco. In fact, BAT, Imperial Tobacco, and Philip Morris International all sat in its top five at the end of 2011, taking up 21% of assets. Several offerings from Mutual Series, as well as Pimco EqS Pathfinder displayPTip('PATHX', 'PATHX','YTD', '', '', '', '', '', '','msg','P');, could also thank tobacco firms, in part, for their 2011 showings.
More to the Story Of course, tobacco stocks alone don't explain these funds' showings in 2011. Most also had substantial stakes in other consumer-oriented companies, such as beverage makers or distributors or household-goods companies, and on the whole those types of stocks also held up well last year. Moreover, it's worth noting that even though these managers have owned tobacco stocks a long time and have faith in their long-range prospects, that doesn't mean such firms will consistently outperform as they did in 2011. The circumstances were unusual, to say the least. When investors are willing to take on more risk, such stocks likely won't be as much in demand. (The first month of 2012 provides an example.)
Readers thus should not take this as a recommendation to pursue funds with big tobacco stakes (or to go out and buy tobacco stocks). Rather, the point is to show how unpopular or unexciting companies, the type that can have fund shareholders wondering if the manager is asleep at the switch, can eventually prove to be very valuable indeed.
Return to Discuss
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Securities mentioned in this article Ticker Price($) Change(%) Morningstar Rating Morningstar Analyst Report With Morningstar Analyst reports you can get our expert Buy/Sell opinions on over 3,900 Stock and Funds Gregg Wolper does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies. Video Reports Amodeo: Long-Dated Bonds Best... More Videos... Most Popular Related News Also in Fund Spy Chuck Akre on the Search for Compounding MachinesFine Fund, Lousy Year Sponsored Links Buy a Link Now Sponsor Center Please Wait... MUTUALFUNDS USA_PM,USA_JVIAX,USA_TBGVX,USA_RAI,USA_BTI,USA_PATHX,USA_MSFAX,USA_WGRNX E0_USA_PM FO_USA_JVIAX FO_USA_TBGVX E0_USA_RAI E0_USA_BTI FO_USA_PATHX FO_USA_MSFAX FO_USA_WGRNX &primaryKeyword=MUTUALFUNDS 2 {CommentWebService} .bloomreach-wrap a { color: #000000; text-decoration: none; } .bloomreach-wrap a:hover{ text-decoration: underline; } .bloomreach-wrap { text-align:left; padding-left:5px; margin:15px 0px 0px 4px; padding-top:15px; width: 370px; } .br-related-heading, .br-related-query, .br-found-heading, .br-sf-widget { border-bottom: 1px solid #CCCCCC; font-size: 11px; line-height: 15px; padding: 5px 0 5px; } .br-related-heading, .br-found-heading { border-top: 2px solid #999999; font-weight: bold; padding: 2px 0 7px; color:#333333; } .br-found-heading { margin-top:30px; } .br-sf-widget-merchant-desc { color: #999999; padding-top:6px; } var br_related_rid = "Rl3llnfqaf8q1i508l0kf-uf,r0,m0"; $(".br-sf-widget-merchant-qv").remove(); $(".br-sf-widget-merchant-img").remove(); $(".br-sf-widget").next("div[id^='br']").remove(); if($(".bloomreach-wrap #BloomreachWidgetProxy").length>0){ $(".bloomreach-wrap #BloomreachWidgetProxy").css("display","block"); } else{ if($("#BloomreachWidget").length>0){ document.getElementById("BloomreachWidget").innerHTML=$("#BloomreachWidgetProxy").html(); $("#BloomreachWidgetProxy").remove(); } } .br-related-heading, .br-found-heading { border-top: 3px solid #666666; font-weight: bold; font-size:10px; padding: 2px 0 7px; color:#000000; } OAS_AD('Bottom'); Content Partners Site Directory Site Map Our Products Corrections Help Advertising Opportunities Licensing Opportunities Glossary RSS Mobile Portfolio Affiliate Careers Company News International Sites: Australia Canada China France Germany Hong Kong Italy The Netherlands Norway Spain U.K. Switzerland Independent. 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Most also had substantial stakes in other consumer-oriented companies, such as beverage makers or distributors or household-goods companies, and on the whole those types of stocks also held up well last year. Moreover, it's worth noting that even though these managers have owned tobacco stocks a long time and have faith in their long-range prospects, that doesn't mean such firms will consistently outperform as they did in 2011. The circumstances were unusual, to say the least. When investors are willing to take on more risk, such stocks likely won't be as much in demand. (The first month of 2012 provides an example.)
Readers thus should not take this as a recommendation to pursue funds with big tobacco stakes (or to go out and buy tobacco stocks). Rather, the point is to show how unpopular or unexciting companies, the type that can have fund shareholders wondering if the manager is asleep at the switch, can eventually prove to be very valuable indeed.
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