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No fund style earns better than my Neutral rating going into 1Q14. My style ratings are based on the aggregation of my fund ratings for every ETF and mutual fund in each style.

Investors looking for style funds that hold quality stocks should look no further than the All Cap Value and Large Cap Blend styles. Only these styles house Attractive-or-better rated funds. Figures 6 and 7 provide details. The primary driver behind an Attractive fund rating is good portfolio management, or good stock picking, with low total annual costs.

Note that the Attractive-or-better Predictive ratings do not always correlate with Attractive-or-better total annual costs. This fact underscores that (1) low fees can dupe investors and (2) investors should invest only in funds with good stocks and low fees.

See Figures 4 through 13 for a detailed breakdown of ratings distributions by investment style. See my free ETF & mutual fund screener for rankings, ratings and free reports on 7000+ mutual funds and 400+ ETFs. My fund rating methodology is detailed here.

All of my reports on the best & worst ETFs and mutual funds in every sector and investment style are available here.

Figure 1: Ratings For All Investment Styles

Source: New Constructs, LLC and company filings

To earn an Attractive-or-better Predictive Rating, an ETF or mutual fund must have high-quality holdings and low costs. Only 6 style ETFs and mutual funds meet these requirements, which is only 0.1% of all style ETFs and mutual funds.

SunAmerica Series, Inc: Focused Dividend Strategy Portfolio (MUTF:FDSWX) is my top All Cap Value mutual fund. It gets my Attractive rating by allocating over 42% of its value to Attractive-or-better-rated stocks.

CA Inc. (NASDAQ:CA) is one of my favorite stocks held by FDSWX and earns my Attractive rating. CA Inc. has grown after tax profits (NOPAT) by 26% compounded annually over the past 7 years. Over the same time frame it has managed to raise its return on invested capital (ROIC) from 3% to 13%. Given its current valuation of ~$34/share, I believe CA is under valued. $34/share results in a price to economic book value (PEBV) ratio of 0.75. This ratio implies that the market expects the company's NOPAT to permanently decline by 25%. Given CA's recent track record of profit growth, this expectation seems overly pessimistic. Strong operating results combined with a cheap valuation make CA an attractive investment.

Touchstone Small Company Value Fund (MUTF:FTVAX) is my worst-ranked Small Cap Value mutual fund. It gets my Very Dangerous rating by allocating over 81% of its value to Neutral-or-worse-rated stocks, and to make matters worse, charges investors annual costs of 5.19%.

Equinix Inc. (NASDAQ:EQIX) is one of my least favorite stocks held by MDPSX. EQIX has not earned positive economic earnings in any of the past 15 years. It's return on invested capital (ROIC) of 6% is below its weighted average cost of capital (WACC) of 7%, and well below the industry average of ~15%. To justify its current valuation of ~$180, EQIX would have to grow after tax profits (NOPAT) by 20% compounded annually for the next 13 years. This amount of growth would also result in NOPAT reaching ~$3 billion, which is 35% greater than Ebay's (NASDAQ:EBAY) current NOPAT. The sustained growth necessary for Equinix Inc. to justify its valuation is awfully high, and investors should stay away.

Figure 2 shows the distribution of our Predictive Ratings for all investment style ETFs and mutual funds.

Figure 2: Distribution of ETFs & Mutual Funds (Assets and Count) by Predictive Rating

Source: New Constructs, LLC and company filings

Figure 3 offers additional details on the quality of the investment style funds. Note that the average Total Annual Cost of Very Dangerous funds is almost six times that of Neutral funds.

Figure 3: Predictive Rating Distribution Stats

* Avg TAC = Weighted Average Total Annual Costs

Source: New Constructs, LLC and company filings

This table shows that only the best of the best funds get our Very Attractive Rating: they must hold good stocks AND have low costs. Investors deserve to have the best of both and we are here to give it to them.

Ratings by Investment Style

Figure 4 presents a mapping of Very Attractive funds by investment style. The chart shows the number of Very Attractive funds in each investment style and the percentage of assets in each style allocated to funds that are rated Very Attractive.

No investment style funds earn our Very Attractive rating.

Figure 4: Very Attractive ETFs & Mutual Funds by Investment Style

Source: New Constructs, LLC and company filings

Figure 5 presents the data charted in Figure 4

Figure 5: Very Attractive ETFs & Mutual Funds by Investment Style

Source: New Constructs, LLC and company filings

Figure 6 presents a mapping of Attractive funds by investment style. The chart shows the number of Attractive funds in each style and the percentage of assets allocated to Attractive-rated funds in each style.

Note that the All Cap Value and Large Cap Blend styles are the only styles with Attractive-rated funds.

Figure 6: Attractive ETFs & Mutual Funds by Investment Style

Source: New Constructs, LLC and company filings

Figure 7 presents the data charted in Figure 6.

Figure 7: Attractive ETFs & Mutual Funds by Investment Style

Source: New Constructs, LLC and company filings

Figure 8 presents a mapping of Neutral funds by investment style. The chart shows the number of Neutral funds in each investment style and the percentage of assets allocated to Neutral-rated funds in each style.

Figure 8: Neutral ETFs & Mutual Funds by Investment Style

Source: New Constructs, LLC and company filings

Figure 9 presents the data charted in Figure 8.

Figure 9: Neutral ETFs & Mutual Funds by Investment Style

Source: New Constructs, LLC and company filings

Figure 10 presents a mapping of Dangerous funds by fund style. The chart shows the number of Dangerous funds in each investment style and the percentage of assets allocated to Dangerous-rated funds in each style.

Seven out of the twelve investment styles allocate more than half of their total net assets to Dangerous rated stocks. This means investors are disproportionately allocating assets to funds with poor holdings

Figure 10: Dangerous ETFs & Mutual Funds by Investment Style

Source: New Constructs, LLC and company filings

Figure 11 presents the data charted in Figure 10.

Figure 11: Dangerous ETFs & Mutual Funds by Investment Style

Source: New Constructs, LLC and company filings

Figure 12 presents a mapping of Very Dangerous funds by fund style. The chart shows the number of Very Dangerous funds in each investment style and the percentage of assets in each style allocated to funds that are rated Very Dangerous.

Figure 12: Very Dangerous ETFs & Mutual Funds by Investment Style

Source: New Constructs, LLC and company filings

Figure 13 presents the data charted in Figure 12.

Figure 13: Very Dangerous ETFs & Mutual Funds by Investment Style

Source: New Constructs, LLC and company filings

Kyle Guske II contributed to this report.

Disclosure: David Trainer and Kyle Guske II receive no compensation to write about any specific stock, sector or theme.

Source: Investment Style Rankings For ETFs And Mutual Funds