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Summary The All Cap Value style ranks fourth in Q4’15. Based on an aggregation of ratings of 0 ETFs and 250 mutual funds. APHLX is our top-rated All Cap Value mutual fund and COPLX is our worst-rated All Cap Value mutual fund. The All Cap Value style ranks fourth out of the twelve fund styles as detailed in our Q4’15 Style Ratings for ETFs and Mutual Funds report. Last quarter , the All Cap Value style ranked fifth. It gets our Neutral rating, which is based on an aggregation of ratings of 0 ETFs (there are no All Cap Value ETFs under coverage) and 250 mutual funds in the All Cap Value style. See a recap of our Q3’15 Style Ratings here. Figure 1 shows the five best and worst-rated mutual funds in the style. Not all All Cap Value style mutual funds are created the same. The number of holdings varies widely (from 23 to 1117). This variation creates drastically different investment implications and, therefore, ratings. Investors seeking exposure to the All Cap Value style should buy one of the Attractive-or-better rated mutual funds from Figure 1. Figure 1: Mutual Funds with the Best & Worst Ratings – Top 5 (click to enlarge) * Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity. Sources: New Constructs, LLC and company filings The Artisan Partners Value Fund (MUTF: APHLX ) is the top-rated All Cap Value mutual fund and the Copley Fund (MUTF: COPLX ) is the worst-rated All Cap Value mutual fund. APHLX earns our Very Attractive rating and COPLX earns our Very Dangerous rating. Microsoft (NASDAQ: MSFT ) is one of our favorite stocks held by All Cap Value mutual funds and earns our Attractive rating. Over the past decade, Microsoft has grown after-tax profit ( NOPAT ) by 7% compounded annually. The company currently earns a top quintile return on invested capital ( ROI C ) of 40%, which makes it one of the most profitable firms in the industry. As Microsoft has shifted its business to focus more on cloud-based solutions and its dominant Office suite of software, many investors have jumped shipped and left MSFT undervalued. At its current price of $53/share, MSFT has a price-to-economic-book-value ratio ( PEBV ) ratio of 1.2. This ratio implies that the market expects Microsoft to increase profits by only 20% over its remaining corporate life. If Microsoft can grow NOPAT by just 6% compounded annually for the next decade , the stock is worth $59/share today – an 11% upside. Macquarie Infrastructure Corporation (NYSE: MIC ) is one of our least favorite stocks held by All Cap Value mutual funds and earns our Very Dangerous rating. MIC is also on November’s Most Dangerous Stocks list. Since 2010, Macquarie’s NOPAT has declined by 13% compounded annually. The company’s ROIC has fallen from 4% to a bottom quintile 1% over this same timeframe. Declining fundamentals and a rising stock price have left MIC overvalued. To justify its current price of $77/share, Macquarie must grow NOPAT by 23% compounded annually for the next 14 years . This expectation seems rather optimistic given the past five years of profit declines. Figure 2 shows the rating landscape of all All Cap Value mutual funds. Figure 2: Separating the Best Mutual Funds From the Worst Funds (click to enlarge) Sources: New Constructs, LLC and company filings Disclosure: David Trainer and Blaine Skaggs receive no compensation to write about any specific stock, style, or theme. Scalper1 News
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