by Tom Taulli | March 29, 2013 12:00 pm
Naturally, a bull market that pulled up the broader indices by their bootstraps — like the impressive 10% return for the S&P 500, which now is at record levels, or the strong 8% improvement in the Nasdaq — means good things for a number of mutual funds.
Still, a rising tide doesn’t lift every last boat, and a few mutual funds with some specific flavors — Indian stocks, or gold, for instance — found out that there’s always a bear market somewhere.
So, which mutual funds stood out in the first quarter of 2013? Here’s a look at six — three of the best, and three of the worst. And we’ll start with the laggards:
Q1 Return: -12.3%
Equities killed it in Q1 2013, so being short was definitely a loser’s strategy. A prime example: Leuthold Weeden‘s Grizzly Short Fund (MUTF:GRZZX), which fell by double-digits in the first three months of the year.
A couple of GRZZX’s top shorted positions include Lions Gate Entertainment (NYSE:LGF), which has gained 45% year-to-date), and MGM Resorts International (NYSE:MGM, +13%).
Of course, shorting has been a terrible strategy for most of the past decade — at least for those in the Grizzily fund. During this period, the average return on GRZZX was a brutal -13%.
Q1 Return: -20%
Not even the disaster in Cyprus was enough to spark a legitimate rally in gold during Q1, as the yellow metal saw prices fall to current levels around $1,600, putting the pinch on gold funds like the SPDR Gold Trust (NYSE:GLD, -4.6%).
But really taking it on the chin were the gold miners. Funds like the Gabelli Gold Fund (MUTF:GLDAX) were pounded thanks to big losses in holdings such as Fresnillo Resources (PINK:FNLPF, -32%), Agnico-Eagle Mines (NYSE:AEM, -22%) and Randgold Resources (NASDAQ:GOLD, -13%).
Unfortunately, the fund’s underperformance isn’t limited to the first three months of 2013 — GLDAX has averaged a 3.5% annual loss over the past five years.
Q1 Return: -23.5%
The deceleration of growth in India has been reflected in the Bombay Stock Exchange Sensitive Index, which fell by 3.4% in Q1. However, investing in emerging markets can be a risky game, and a few clunkers can wreak havoc on a portfolio.
The Dreyfus India Fund (MUTF:DIIAX) found itself on the wrong side of a number of trades, aggravating losses — and obviously not keeping up with its focus on quality and long-term growth potential.
Some of the biggest laggards in Dreyfus’ current holdings include Reliance Communications (-25%), loan provider IFCI Limited (-22%) and Tata Motors (NYSE:TTM, -15%). All are top 10 weightings, to boot.
Q1 Return: +20.5%
Since 1999, Paul Abel has managed the Kinetics Medical Fund (MUTF:MEDRX), which focuses on pharma and biotech investments. These sectors were certainly red-hot in the latest quarter, and the fund was positioned nicely to capitalize on this.
Some of the fund’s top holdings were especially productive, such as Eli Lilly (NYSE:LLY, +15%), Pfizer (NYSE:PFE, +15%) and Novartis (NYSE:NVS, +12.5%).
Abel takes a long-term perspective on things, considering the time it can take to get drugs to approval. The fund is so long-term-focused, in fact, that MEDRX’s turnover ratio is listed as 0%.
Speaking of long-term, that’s also the time horizon of the fund’s past success. MEDRX has averaged nearly 9% annual returns since inception in 1999.
Q1 Return: +23.5%
The stock market’s full-on risk-on mode has certainly been nice for aggressive small-cap funds. Just look at the Pacific Advisors Small Cap Value Fund (MUTF:PASMX), which is managed by George Henning. His career has spanned over three decades.
Under the fund’s mandate, he is required to invest at least 80% of the assets in small caps (values under $2 billion) and micro caps (values under $500 million). As a result, it’s a good bet that you haven’t heard of many of the investments in the portfolio.
PASMX owes some credit to the big returns of stocks like trucking company Saia (NASDAQ:SAIA, +56%), maintenance and repair product distributor DXP Enterprises (NASDAQ:DXPE, +52%) and tank barge firm Kirby (NYSE:KEX, +24%).
Q1 Return: +26%
To reverse two decades of stagnation and deflation, Prime Minister Shinzo Abe has pursued a radical fiscal and monetary policy. And investors seem to think it will work. So far this year, the Nikkei is up nearly 19%.
That has been a huge driver for the Fidelity Japan Smaller Companies Fund (MUTF:FJSCX). Portfolio manager Nicholas Price has had lots of success by focusing the consumer discretionary sector, such as with autos, apparel and durables. There has also been strength from healthcare and consumer staples.
He has also invested in a variety of hot social stocks, like mobile game operator Gree (NASDAQ:GREE). However, some of the fund’s hottest current holdings have included e-commerce company Kakaku.com (+62%), childcare product maker Pigeon (PINK:PGENY, +41%) and financial stock Orix (NYSE:IX, +19%).
Tom Taulli runs the InvestorPlace blog IPO Playbook. 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.
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