Morningstar Advisor - December 2012/January 2013 - (Page 18)

Investments à la Carte Five Picks for the Present Stock: WellPoint WLP Fair Value Estimate $91 Morningstar Rating QQQQQ Uncertainty Medium Economic Moat Narrow Morningstar Credit Rating BBB+ Market Cap $19.6 billion YTD Stock Price Compared With Fair Value Estimate $120K 100 80 60 1/2/12 Daily stock price Fair value estimate (Gaps indicate when fair value estimate was under review.) 4/2/12 7/2/12 10/2/12 10/2/12 WellPoint has one of the largest medical memberships among health insurers, giving it significant bargaining power with healthcare providers and leveraging its largely fixed cost structure. We think the market has overreacted to the threat posed by reform legislation. Some aspects of the legislation are positive for WellPoint, such as the new federal insurance subsidies and expansions to the Medicaid program. WellPoint also benefits from its minimal exposure to Medicare Advantage. The firm’s embattled CEO recently resigned. We believe a successful management transition could serve as a catalyst to the help the stock approach its fair value level. Matthew Coffina Mutual Fund: T. Rowe Price Personal Strategy Growth TRSGX 120 Category Aggressive Allocation 100 Asset Allocation 80 Cash Investment Style 7 Large Growth Fair Value - Daily Morningstar Rating Daily QQQQ Closing Price Morningstar Analyst Rating Expenses 0.73% Minimum Investment $2,500 120 60 US Stock Non US Stock Bond Other 40 1/2/122/7/123/19/12 5/1/126/6/127/17/128/30/1210/17/12 1/3/122/8/123/20/12 5/2/126/7/127/18/128/31/1210/18/12 1/4/122/9/123/21/12 5/3/126/8/127/19/12 9/3/12 10/19/12 1/5/122/15/123/30/125/15/126/28/128/8/129/18/12 1/10/122/23/124/4/125/16/126/29/128/9/129/19/12 1/6/122/16/12 4/2/125/8/126/18/12 8/1/129/6/1210/22/12 1/11/122/24/124/5/125/17/12 7/2/128/7/129/17/12 1/9/122/17/12 4/3/125/9/126/19/12 8/2/129/7/1210/23/12 1/12/122/27/124/6/125/18/12 7/3/128/13/129/26/12 1/13/122/28/124/9/125/21/12 7/4/128/14/129/27/12 1/16/122/29/124/13/125/29/127/9/128/17/1210/2/12 1/17/12 3/1/124/11/125/25/127/5/128/15/129/28/12 1/18/12 3/2/124/12/125/28/127/6/128/16/1210/1/12 1/19/12 3/5/124/16/125/30/127/13/128/28/1210/15/12 1/20/12 3/6/124/17/125/31/127/16/128/29/1210/16/12 1/23/12 3/7/124/18/12 6/1/127/12/128/27/1210/12/12 1/24/12 3/12/124/25/126/5/12 7/20/12 9/4/12 10/24/12 1/25/12 3/8/124/19/12 6/4/12 7/23/12 9/5/12 10/25/12 1/26/123/13/124/26/126/11/127/25/129/10/1210/26/12 1/27/123/9/124/20/12 6/12/127/26/129/11/1210/29/12 1/30/123/14/124/27/126/13/127/27/129/12/1210/30/12 1/31/123/15/124/30/126/14/127/30/129/13/1210/31/12 2/1/12 3/16/12 5/4/126/15/127/31/129/14/12 2/2/12 3/22/12 5/7/12 6/20/12 8/3/12 9/20/12 2/3/12 3/23/12 5/10/126/25/128/6/12 9/21/12 2/6/12 3/26/12 5/11/126/26/128/10/129/25/12 2/10/123/27/12 5/14/126/27/12 8/20/1210/3/12 2/13/123/28/12 5/22/12 7/10/128/23/1210/10/12 2/14/123/29/12 5/23/12 7/11/128/24/1210/11/12 2/20/12 4/10/125/24/12 7/24/12 9/24/12 2/21/12 4/23/12 6/21/12 8/21/1210/4/12 2/22/12 4/24/12 6/22/12 8/22/1210/5/12 10/8/12 10/9/12 –100 –50 0 50 100 This is effectively a fund of funds. Its securities are chosen by some of T. Rowe’s finest managers. (The fund directly owns some of those skippers’ funds, such as T. Rowe Price Instl. Emerging Markets Equity IEMFX and T. Rowe Price Instl. High Yield TRHYX.) The portfolio is overseen by the firm’s veteran asset-allocation committee, which makes100 very modest portfolio shifts depending on its view 80 of valuations and the economy. The fund usually has a bigger equity stake than its 60 typical aggressive-allocation peer and has been 40 1/3/122/8/123/20/125/1/12 1/4/122/9/123/21/125/2/12 1/5/122/15/123/30/125/156 1/10/122/23/124/4/125/16 1/6/122/16/12 4/2/125/8/1 1/11/122/24/124/5/125/17 1/9/122/17/12 4/3/125/9/1 1/12/122/27/124/6/125/18 1/13/122/28/124/9/125/2 1/16/122/29/124/13/125/ 1/17/12 3/1/124/11/125/2 1/18/12 3/2/124/12/125/ 1/19/12 3/5/124/16/12 1/20/12 3/6/124/17/12 1/23/12 3/7/12 4/19/12 1/24/12 3/12/124/25/12 1/25/12 3/8/12 4/20/12 1/26/123/13/124/26/12 1/27/123/14/124/27/12 1/30/123/15/12 5/3/12 2/1/12 3/19/12 5/4/1 2/2/12 3/22/12 5/7/1 2/3/12 3/23/12 5/10/ 2/6/12 3/26/12 5/11/ 2/10/123/27/12 5/14 2/13/123/28/12 5/2 2/14/123/29/12 2/20/12 4/10/12 2/21/12 4/23/12 2/22/12 4/24/12 a bit on the volatile side. But it’s delivered 1/2/122/7/123/16/124/30/12 fine1/31/123/9/124/18/12 6 risk-adjusted long-term returns. Greg Carlson Separate Account: ClearBridge Equity Income Builder Category 4 Large Blend Asset Allocation Cash US Stock Non US Stock Bond Other Investment Style 7 Large Growth Morningstar Rating QQQQQ Minimum Investment $5 million Number of Holdings 81 Total Assets $4.73 billion –100 –50 0 50 100 While this strategy is only four years old, it’s in highly experienced hands. Lead manager Hersh Cohen amassed an excellent record at Legg Mason ClearBridge Appreciation SHAPX from 1979–2010, and he uses a similar approach to equities here. He and his comanagers look for financially sturdy firms that generate lots of cash and have clear competi- tive advantages. The difference from his old charge is that he’s now looking for sizable yields and supplementing the equity slice with as much as a 20% stake in preferred stocks, convertibles, and other securities. He’s managed Legg Mason ClearBridge Equity Income Builder SOPAX since 2009 using an identical strategy. Greg Carlson 18 Morningstar Advisor December/January 2013

Table of Contents for the Digital Edition of Morningstar Advisor - December 2012/January 2013

Morningstar Advisor - December2012/January 2013
Contents
Contributors
Letter From the Editor
What Stands Between Me and Stupid
Why Do You Use Dynamic Funds of Funds?
Serving Clients and Community
How to Pick an ETF Managed Portfolio Strategy
Tactical View of Risk
Investments á la Carte
Investment Briefs
Unbundling ETF Managed Portfolios
Risks Loom Over Telecom Industry
Outsourcing Asset Allocation
ETF Managed Portfolios on the Rise
Age-Based Options Take Over 529 Industry
How the Landscape for Advisors Is Changing
Mark Egan Embraces Volatility
Alpha, Beta, and Now … Gamma
Performance Gaps
Gains in Momentum
Companies Where Management Teams Add Value
Our Favorite Mutual Funds
50 Most-Popular Equity ETFs
Undervalued Stocks With Wide Moats
The Once and Future King

Morningstar Advisor - December 2012/January 2013