by Tom Taulli | June 28, 2013 6:30 am
A little recent volatility hasn’t been nearly enough to shake off what’s been a fantastic year for many mutual funds.
Just about every size of U.S. stock has done well, with large-cap, midcap and small-cap value funds averaging between 13% and 15%, according to Morningstar. Japanese equity funds have done well, too, returning nearly 15%.
Oh, if only all funds were so lucky.
Funds offering exposure to gold and emerging markets haven’t just underperformed U.S. and Japanese stocks … they’ve taken a big, negative bite.
We’ll take a look at some of the best and worst mutual funds of 2013’s first half, examining just one fund per industry or category (otherwise, all the losers would have been in precious metals!), but limiting it to non-leveraged funds no smaller than $100 million in assets. So, here are the darlings and dogs of the first six months of 2013.
YTD Return: +29%
Biotech stocks have been red-hot this year thanks to huge advances against diseases like cancer, diabetes, hepatitis C and HIV. A key driver of late has been the deep analytics on the human genome.
At the same time, however, there also has been another boost from mergers & acquisitions, as Big Pharma’s aging giants increasingly look to dealmaking to make up for shortcomings thanks to the expiration of patents on its blockbuster drugs.
All of this has been welcomed with open arms by the staff heading the Fidelity Select Biotechnology Fund (FBIOX). That includes manager Rajiv Kaul, who has been investing in biotech for the past 17 years and has led FBIOX to an average annual return of nearly 33% in the past three years.
Current FBIOX top holdings include Gilead Sciences (GILD), Amgen (AMGN), Celgene (CELG) and Biogen (BIIB). The fund charges 0.81% in expenses, or $81 for every $10,000 invested, and has no sales load fee.
YTD Return: -13%
There’s a pretty easy way to determine whether a bear fund is doing poorly. Has the market done well? If so, your bear fund probably isn’t too happy about it.
The big player in the market — Federated Prudent Bear (BEARX), which is an actively managed short-selling fund — fell off nearly 13%.
Fund manager Doug Noland is a top short seller, but even the best of bears are hard-pressed to make money when the market’s in full bull mode. Consider that the average return for the past three years is a grisly -16%.
Regardless, Noland still has his eye on a few potential short opportunities. Current BEARX top holdings include Aflac (AFL), Carnival (CCL) and FedEx (FDX).
A-class shares have a hefty 1.74% expense ratio and are subject to a maximum 5.5% sales charge.
YTD Return: +29%
Thanks to the highly aggressive monetary and fiscal policies in Japan — led by Prime Minister Shinzo Abe — the Nikkei has hit a big hill on its roller-coaster ride. Even despite a recent selloff, the index has returned a sizzling 27%.
But small-cap Japanese stocks did the Nikkei one better. Or two, if we’re talking about percentage points.
The Fidelity Japan Smaller Companies Fund (FJSCX) fund has returned 29% year-to-date — and that success hasn’t wholly just been about riding a crazy bull market. Portfolio Manager Nick Price has racked up a pretty good record in the past three years, posting an average annual return of nearly 15%.
Price focuses on growth companies that are selling at attractive valuations, but also have a catalyst such as a restructuring or implementing of new technologies. That has resulted in top holdings like price-comparison site Kakaku and childcare/nursing product manufacturer Pigeon Corp.
FJSCX is a no-load fund that charges 1.05% in expenses.
YTD Return: -18%
The lead manager of the Templeton BRIC Fund (TABRX) is Mark Mobius, a well-known emerging-market investor with 30 years of experience under his belt. He spends much of his time traversing the globe, speaking with members of many of the companies he invests in.
Unfortunately, all that deep research has been of little help this year. The emerging-market BRIC nations — Brazil, Russia, India and China — have crapped out for all investors, including Mobius.
While Mobius often says investing in emerging markets is for those who have a long-term perspective, the long-term hasn’t been all that great for TABRX, either, which has lost nearly 9% on average in the past five years.
Current top holdings include India’s Infosys (INFY), China Mobile (CHL) and Brazilian mining firm Vale (VALE). A shares charge a high 2% in expenses, and also are subject to a maximum initial sales charge of 5.75%.
YTD Return: +30%
Money manager Bill Miller — who lost a fortune during the financial crisis by getting aggressive with financials — was thought to be washed up.
Lately, however, Miller has been getting his groove back, as illustrated by the standout returns of the Legg Mason Opportunity Trust (LGOAX).
Miller does extensive research not just on companies, but also industry trends, to uncover big value gaps. To this end, he has benefited from nice moves in the housing sector and airlines, and also scored a big win with his investment in Sprint (S). Currently, LGOAX’s top holdings include Genworth Financial (GNW), United Continental (UAL), PulteGroup (PHM) and Netflix (NFLX).
However, Legg Mason Opportunity’s performance doesn’t come cheap: A shares charge 2.03% in expenses and are subject to a maximum 5.75% sales charge.
YTD Return: -53%
It’s no secret that gold has been in free fall. With the Federal Reserve appearing to get more hawkish, the prospects for inflation look slim, and this appears to be taking down gold. Prices have fallen nearly 23% in the second quarter alone.
As one would expect, funds focused on gold and gold miners have gotten absolutely smashed this year. The Franklin Gold and Precious Metals Fund (FKRCX) — which has lost more than half its value since Jan. 1, 2013 — has been no exception.
Portfolio manager Steve Land has a knack for early-stage minors that trade on smaller exchanges, and these have been among some of the hardest-hit companies in the market. Some of FKRCX’s holdings include Newcrest Mining (NCM), Goldcorp (GG) and Randgold Resources (GOLD), which have all lost between 35% and 55% year-to-date.
Franklin Gold and Precious Metals’ A shares charge 0.96% in expenses and are subject to a max initial sales charge of 5.75%.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. 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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