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Best
Mutual Funds
While individual stocks and exchange-traded-funds (ETFs) get most of the
attention, in fact, most actively managed (not index followers) mutual
funds have beaten the market so far this year. As of July 12, the overall
market, at least as measured by the S&P 500 index, was down 3.3% for the
year. As of that date, 1,817 funds focusing on U.S.-based stocks had
outperformed the S&P compared to only 899 funds that fell short.
Even better, 754 funds, or 28% of the total, were in positive territory,
130 were up at least 5%, and 21 funds scored 10% or higher gains. First,
I’ll describe the funds that were up 10%. Then I’ll tell you about four
funds that have served long-term investors the best over the past
10-years. These 10-Year All Stars have posted positive returns
year-to-date, over the past 12-months, and positive average annual returns
over the past three-year, five-year, and 10-year periods.
Top Funds: Year-To-Date
Starting with this year, the top-performing fund, up 17% so far,
was Fidelity Select Transportation (FSRFX), which mainly holds
railroads, airlines, and trucking companies. Its top five holdings include
railroad operators Union Pacific and CSX, United Parcel Service, and
airlines Delta, UAL and Southwest. Fidelity Select is a no-load fund,
meaning that it doesn’t charge a sales commission when you buy or sell
(however, your broker may or may not charge a transaction fee). Here’s a
surprise, this fund has outperformed the overall market (average annual
returns) over the past one-year, three-year, five-year, 10-year, and 15
year-periods (it’s not a 10-Year All Star because it didn’t produce
positive returns over each of those timeframes).
Next comes Weitz Hickory (WEHIX), up 15% year-to-date. Weitz
follows a value selection strategy, picking out-of-favor stocks that it
considers undervalued. Its biggest holdings include media, communications
and entertainment business owner Liberty Media, real estate mortgage
investor Redwood Trust, pharmaceutical services provider Omnicare,
insurance broker Willis Group, and diagnostic laboratory operator
Laboratory of America. Weitz has outperformed the S&P 500 over the past
12-months, but its performance has been spotty over longer periods.
Number three, Tilson Focus (TILFX), up 14%, also follows a value
strategy. Its biggest holdings include Warren Buffett’s conglomerate
Berkshire Hathaway, communications service provider Iridium, beer maker
Anheuser-Busch Inbev, and investor Liberty Acquisition. Tilson, which
started in 2005, has outperformed the S&P 500 over the past one-year,
three-year, and five-year periods.
Real Estate Rules
Eleven of this year’s top 21 funds specialize in real estate. That
is, they hold only real estate investment trusts. REITs are a special type
of corporation that owns real estate properties, or invests in mortgages
or other securities backed by real estate. REITs don’t pay federal income
taxes as long as they pay out at least 90% of taxable income to
shareholders in dividends. The top performer of the 21 real estate funds
was Forward Strategic Realty A (KSRAX), a load fund that charges a
5.75% sales fee. Forward recorded a 14% gain so far this year.
Neuberger Berman Real Estate (NBRFX), up 12% for the year, was the
best no-load real estate fund. Both have similar holdings, except that
Forward Strategic includes mortgage investor Annaly Capital Management in
its top holdings while Neuberger Berman’s top five holdings are all
property owners. Forward Strategic has posted spotty long-term results.
Neuberger Berman, which started in 2002, has outperformed the S&P 500 over
the past one-year, three-year, and five-year periods.
More Good Funds
Besides for funds specializing in real estate, the list returning
10% or higher so far this year includes Weitz Partners III
Opportunity (WPOPX), Fidelity Select Air Transportation (FSAIX),
Delaware Pooled Focus S (DCGTX), Fidelity Select Banking (FSRBX),
Fidelity Select Leisure (FDLSX), and Perritt Emerging
Opportunities (PREOX).
10-Year All Stars
Now, on to the 10-Year All Stars. Only four mutual funds investing
mainly in U.S.-based stocks have produced positive returns so far this
year and over the past one-year, three-year, five-year, and 10-year
periods.
The 10-Year All-Stars are: Fairholme (FAIRX) with a 12% average
annual return over 10-years, Perkins Small Cap Value L (JSIVX), up
10%, Dreyfus Opportunistic Small Cap (DSCVX) up 7%, and Gabelli
ABC AAA (GABCX), with a 4% average annual
return over 10-years.
All of the 10-year all-stars are no-load funds, but Perkins is closed to
new investors. Fairholme and Gabelli require $10,000 opening balances but
Dreyfus only requires a $2,500 minimum investment.
As you’ve undoubtedly heard, past performance doesn’t guarantee anything
about the future. Nevertheless, it’s hard to ignore those 10-year track
records.
published 7/18/10 |
