Assuming that the market
continues last year’s penchant for growth, here are six mutual funds
that, as a group, I expect to outperform in 2020.
Finding the Funds
To come up with the list, I started by listing the
600 or so U.S. equity funds that beat the S&P 500’s 29% return for
Consistent Market Beaters
Then, I honed the list down to the 321 funds that
also met or beat the S&P’s average annual three and five year
returns, which were 15% and 12%, respectively.
Next I ruled out funds that were closed to new
investors, charged sales commissions (loads), or required more than
$2,500 minimum initial purchases. Surprisingly, 148 funds passed all
of my requirements. From that list I picked last year’s six top
performing funds, except that I excluded funds with portfolios
essentially duplicating already listed funds.
Before I get to the list, I need to define market
capitalization, which is the value of a firm’s outstanding shares.
Market-caps below $500 million are micro-caps, while values between
$500 million and $2 billion define small-caps. Mid-caps have $2
billion to $10 billion market-caps, large-caps are $10 billion to
$50 billion, and over $50 billion are mega-caps.
Fidelity Select Semiconductors
(FSELX): Holds 57 semiconductor chip makers, mostly large- and
mega-caps. Its biggest holdings are Intel (INTC) and Broadcom
(AVGO). Fidelity returned 64% in 2019, and 25% and 23%, on average
annually, over the past three and five years. Hardly a ‘buy and
hold” player, Fidelity turns over 130% of its holdings annually.
Needham Small Cap Growth
(NESGX): Holds only 35 small- and mid-cap stocks that it views as
emerging market leaders. Biggest holdings, Photronics (PLAB) and PDF
Solutions (PDFS) comprise 20% of portfolio. Returned 54% in 2019,
and averaged 18% and 16% over three and five years. Annual turnover
Fidelity Select Technology
(FSPTX): Holds all of the big tech players, but Apple
(AAPL) and Microsoft (MSFT) account for 38% of portfolio. Returned
51% last year, and averaged 27% and 21% returns over the past three
and five years. Annul portfolio turnover is 126%.
Baron Partners Retail (BPTRX):
Holds a concentrated 28 stock portfolio comprised mostly of mid-cap
stocks with strong growth potential. Some have been in the portfolio
for 15 years or even longer (only 8% annual turnover). CoStar Group
(CSGP) and Tesla (TSLA), comprise 37% of holdings. Returned 45% last
year, and averaged 24%t and 16% annually over three and five years.
(TOPPX): Holds a 194 stock portfolio comprised mostly of
Internet-based businesses. Biggest holdings, Shopify (SHOP) and
ServiceNow (NOW) account for 11% of portfolio. Returned 45% last
year, and averaged 22% and 13% annually over three and five years.
Annual turnover is 133%.
DF Dent Premier Growth (DFDPX):
Holds 34 mostly large- and mega-cap stocks in a variety of sectors,
but overweighting technology and financials. Biggest holdings, Visa
and Ecolab comprise 12% of portfolio. Returned 43% in 2019, and
averaged 24% and 16% annually over three and five years. Annual
portfolio turnover is 23%.
As always, past performance doesn’t predict the
future. These six funds could underperform in a weak market. All
fund data courtesy of Morningstar (www.morningstar.com).