Morningstar Advisor - October/November 2009 - 59

31000 26000 21000 16000 11000 6000 top-five holding Waste Connections WCN. The waste hauler has succeeded by countering industry norms. Rivals knock heads in congested urban markets with heavy competition but Waste Connections has built dominant positions in secondary and rural markets where it is the main player. It is also the industries low-cost operator. Brayman and his team been remarkably consistent over the years, topping the Russell 2000 Growth Index in nearly all calendar years. The separate account will lag a bit in such years as 2003 when the poorest-quality companies led the market, but expect it to continue to win out over time. Michael Breen Mutual Fund CGM Focus CGMFX $31K 21 S&P 500 TR 11 05 06 07 08 09 This super-aggressive fund is down, not out. Manager Ken Heebner is several notches above bold. He trades rapidly, runs a concentrated portfolio, make big sector bets, and, at times, shorts stocks. That has given the fund a Jekyll-and-Hyde risk/reward profile. Right now, Mr. Hyde has the upper hand. The fund is flat so far in 2009 after shedding nearly half its value in 2008 and is being left in the dust by its rivals. But Heebner has hit the mark considerably more often than not over time. So despite the fund’s recent stint of gross underperformance it still has the best long-term returns in its category. This hyper-aggressive fund isn’t for everyone and should only be used to fill a small, speculative slot in a portfolio. But history shows Heebner delivers in spades over time. Making a small investment in the fund when it’s deep in a periodic trough makes more sense than chasing into it after one of its giant, near-term gains. Michael Breen Hindsight: Spring 2008 a la Carte Our picks from the Spring 2008 issue have held up well. It may not seem like it and drugstoreJan-09 Walgreens WAG have posted comparatively small losses in a operator Jan-05 Jan-06 Jan-07 Jan-08 because they are all in the red, but the market has been brutal since we made these tough market, as has ETF pick Healthcare Select SPDR XLV. Primecap Odyssey picks, with the S&P 500 Index shedding more than a fourth ofMar-05 Nov-05 Jul-06Feb-07 Aggressive Growth POAGX has been the standout mutual fund. The managers have itsJun-05andMay-06 Mar-07 value Apr-06 Feb-05 Oct-05the Sep-06 May-07 Feb-08 Oct-08 Jun-09 Apr-05 Feb-06 Oct-06 Jun-07 Mar-08 Feb-09 May-05 Mar-06 Nov-06 Jul-07 Apr-08 Mar-09 Jul-05 Aug-05 Jun-06 Apr-07 Sep-05 Aug-06 Aug-07 May-08 Apr-09 Jun-08 May-09 Jul-08 Aug-08 Sep-08 Jul-09 Aug-09 MSCI EAFE index faring even worse. A little more than half our picks are topping their consistently Dec-08mark buying strong-growing firms at reasonable valuations hit the Dec-05 Dec-06 Sep-07 Oct-07 Nov-07 Dec-07 Nov-08 appropriate benchmarks. But the winners have lost considerably less than their and they held up well in the recent downdraft. We haven’t soured on any of our Spring respective bogies while nearly all the laggards are within striking distance of them. A 2008 picks. All continue to have bright futures. Michael Breen trio of health-care-related picks has been especially solid. Drugmaker Pfizer PFE Pick Type Cum Return to Date (%) Back Then, We Said Now, We Say Boeing BA Causeway Intl Value Inv CIVVX Diamonds Trust DIA Health Care Select SPDR XLV Janus Contrarian JSVAX Medtronic MDT Pfizer PFE Primecap Odyssey Aggressive Growth POAGX Vanguard Inflation-Protected Secs VIPSX Walgreen WAG WHG LargeCap Value Instl WHGLX S&P 500 MSCI EAFE BarCap US Agg Bond TR S MF ETF ETF MF S S MF MF S MF Index Index Index –47.87 –29.56 –25.57 –9.40 –35.70 –26.88 –14.39 –7.25 –0.19 –11.2 –28.43 –26.66 –33.34 6.82 “Can survive cyclical dips.” “Topnotch managers.” “Risky but too cheap.” “Defensive stocks at fair prices.” “Takes risks but makes them work.” “Innovator still tops.” “Pipeline better than market thinks.” “We have full confidence.” “A great inflation foil.” “Will weather economic weakness.” “Experienced team with proven strategy.” “Still like it for the long haul.” “Sensible approach will win out over time.” “Still a good core holding.” “Cheap access to a solid sector.” “It will rebound.” “Well positioned versus rivals.” “Foundation still solid.” “Still one of the best.” “Cheap and good.” “Hanging tough.” “Recent missteps, but still a top choice.” The Spring 2008 issue was mailed to subscribers in mid May 2008. Return data is from April 30, 2008, through July 31, 2009. MorningstarAdvisor.com 59

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Morningstar Advisor - October/November 2009

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