Mutual Fund: Davis Financial
Replacement ETF: Financial Select Sector SPDR
2012 has been a standout year for financial stocks. While the U.S. economy still is cobbling together a sluggish rebound, bright spots like real estate and auto sales have really driven up demand for loans.
But depending on how you invested in financials, you might not have seen your fair share of returns.
Davis Financial (MUTF:RPFGX) is a mutual fund that focuses primarily in financial services stocks like American Express (NYSE:AXP) and Wells Fargo. However, as a hedge against volatility, RPFGX invests in a number of non-financials, including names like energy firm Canadian Natural Resources (NYSE:CNQ), pharmacy giant CVS Caremark (NYSE:CVS) and even search-engine titan Google (NASDAQ:GOOG).
The fund has returned a market-beating 17% in 2012, and charges 0.91% in fees. A-class shares also require a 4.75% load.
However, it was weighed down in comparison to the Financial Select Sector SPDR (NYSE:XLF), which charges just 0.18% and has returned 25% for the year to date.
In this final case, however, it’s also important to point out that the disparity was caused by much more than fees. This is what can happen when a fund that says it’s about a certain category, but veers into other sectors. RPGFX’s interest in other categories might shield it during poor times for financials, but if you’re banking on a bull run for financials, the XLF is a truly representative play that will win out, time and time again. So don’t just look at fees — look at what’s inside the fund.
Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “How to Create the Next Facebook” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders.” Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.