PRINT
EMAIL
COMMENT
BUZZ UP
DIGG THIS
It was an ugly year for fund investors. Most stock funds bled red ink as share prices plunged because of worries that falling housing prices and a growing number of mortgage defaults would destabilize the nation's financial system. The collapse of Bear Stearns in March and growing fears over the summer that mortgage giants Fannie Mae and Freddie Mac might follow gave the bears plenty of ammunition. Adding to the gloom was the rise in fuel prices, which serve as a de facto tax on hard-pressed Americans and wreak havoc on industries such as airlines, autos and trucking.
The key to success over the past year was to hold funds that were stuffed with, well, stuff. Natural-resources funds soared an average of 35% over the past 12 months to July 1, while precious-metals funds did nearly as well (33%). Among diversified funds, Ken Heebner, manager of CGM Focus and CGM Mutual, kept up his remarkable performance of recent years by betting heavily on minerals and energy companies.
RELATED LINKS | |||
 |
Fund Rankings by Type and Style | ||
|
|
Download Our Complete Fund Rankings | ||
|
|
How to Navigate the Tables | ||
|
|
The Best ETFs | ||
The best of a sorry lot of diversified funds was the large-company growth category. That segment lost 6.1%, on average. Chaos in the financial sector was particularly harmful for value funds. The average financial-sector fund lost 34% over the past year, while large-company value funds, which often own a lot of banks and insurers, surrendered an average of 17%. Bill Miller, the bargain-hunting manager of Legg Mason Value who was lionized for once having beaten the market 15 straight years, cost his shareholders 36% over the past year.
Investors found little relief in foreign markets. The average diversified international-stock fund dropped 10% over the past year. But Latin America funds bucked the trend: They earned 25%, on average.
To see which funds did best in 11 categories over a variety of periods and which we think will perform well in the future, see below and our ONLINE FUND RANKINGS that let you sort by style and type. You also can DOWLOAD OUR COMPLETE RANKINGS.
LARGE-COMPANY GROWTH FUNDS: Winning by losing less
It may be cold comfort, but large-company growth funds did better than any other diversified domestic-stock category over the past year. CGM Mutual's (symbol LOMMX) appearance here is a bit of a surprise, given that it generally keeps at least one-fourth of its assets in bonds or cash. What isn't surprising is that a fund run by Ken Heebner, whom Kiplinger's has dubbed "The Savviest Stock Picker in America," is at the top of the charts.
Heebner invests in a relative handful of stocks -- ones that he thinks are beneficiaries of major economic trends -- and trades them frenetically. Jordan Opportunity (JORDX), which debuted in 2005, looks a lot like a Heebner-run fund. Jerry Jordan owns relatively few stocks and trades quickly. Morningstar puts Kinetics Paradigm (WWNPX), a member of the Kiplinger 25, in this category, but we consider it a go-anywhere fund.
LARGE-COMPANY BLEND FUNDS: Hewing closely to the market
These funds, which focus on stocks with a mix of value and growth attributes, tend to closely track the overall market. So the category's poor performance lately isn't surprising. A standout is CGM Focus (CGMFX, a member of the Kiplinger 25. Manager Ken Heebner's brilliance at picking investment themes and the stocks that go best with them is in full bloom with this fund. Focus typically owns only about 20 stocks and can sell short.
Another volatile fund worth considering is Janus Contrarian (JSVAX). Manager David Decker stumbled in the past year, but, like Heebner, he scours the globe for good deals and finds more winners than losers. Two interesting funds with value bents among the 20-year winners are Longleaf Partners (LLPFX) and Sequoia fund (SEQUX). The latter had been closed to new investors for 26 years before reopening in May.
LARGE-COMPANY VALUE FUNDS: Between a rock and a hard place
This category had a tough year. The credit crunch pummeled financial stocks, which are typically prominent in a value portfolio. ProFunds Basic Materials UltraSector (BMPIX) rode stocks of chemical makers and metal producers to the top of the charts. But calling this a large-company value fund is a stretch: It's linked to an index of materials companies but owns enough different industries to qualify as diversified.
Amana Income (AMANX)sheltered shareholders from the carnage in financials because it invests according to Islamic principles, which forbid lending money. Susan Byrne buys brand-name businesses that generate a lot of sales overseas for her Gamco Westwood Equity AAA (WESWX). Dodge & Cox Stock (DODGX) has performed poorly recently but remains a fine choice for investors with the patience to stick with this patiently run fund.
SMALL AND MIDSIZE GROWTH FUNDS: All over the map
Because Morningstar considers funds that invest in companies of any size to be mid-cap specialists, you'll find everything from microscopic start-ups to hulking blue chips in this category. Janus Orion (JORNX) is one fund that crosses size categories. It's been a consistent performer, although manager John Eisinger took over only in January.
Loomis Sayles Mid Cap Growth (LAGRX) coasted into 2008 after delivering a 39% gain in 2007, partially thanks to a hefty stake in energy. American Century Giftrust (TWGTX) and American Century Heritage (TWHIX) sport nearly identical portfolios. Managers David Hollond and Greg Walsh employ a momentum strategy at each, buying com-panies with accelerating profits. Don Hodges and son Craig have produced a fine long-term record at Hodges (HDPMX) fund by investing wherever they see rapid earnings growth.
SMALL AND MIDSIZE BLEND FUNDS: Riding right down the middle
This is a catch-all category, consisting of funds that invest in a combination of growth and value stocks and those that buy companies of any size. Icon Materials invests almost entirely in chemical, metal and other materials companies, owning stocks in enough industries to count as diversified. At Fidelity Leveraged Company (FLVCX), manager Tom Soviero buys into companies that carry a lot of debt on their balance sheets. His aggressive approach continues to pay off with category-trouncing returns.
Reprint Article
