Putting Flexibility to Good Use
Alec Lucas: Gold-rated American Funds Fundamental Investors puts its flexible mandate to good use. The fund strives to match rather than exceed the S&P 500's yield, which means it can own nondividend-paying growth stocks, such as top-five holding Amazon. The fund can also buy lower-yielding names whose firms have prioritized growing their payout along with their businesses, like fellow top-five holding Broadcom. The semiconductor company has increased its quarterly dividend more than tenfold since the fund bought it in 2011.
With a 35% cap on overseas exposure, the fund also has ample leeway to venture abroad. The fund's current 12% stake in non-U.S. stocks ranks in the large-blend Morningstar Category’s top decile. The fund can look out of step at times, but over a full market cycle, outperformance has been very consistent. From longest-tenured manager Dinah Perry's March 1993 start date through February 2017, the fund has beaten the S&P 500 Index in 164 out of 169 rolling 10-year periods, or 97% of the time. Skilled management and low fees breed confidence that the fund can build on its record.