by Bill Wysor | December 30, 2013 3:13 pm
2013 has been a year to celebrate for most stock-market investors, with the broad market up about 31% as measured by the S&P 500 Index as equity investors continue to push prices higher.
One of the real stories this year is how the markets have risen — based on multiple expansion, not so much on earnings growth. In other words, investors are willing to pay more for each dollar of earnings that companies produce.
With an up market like the one we have experienced in 2013, there are always mutual funds and strategies that have had the wind at their respective backs.
Here are a few of the best mutual funds of 2013 across several slices of the market:
YTD Return: 54%
For a more diversified option, PrimeCap Odyssey Aggressive Growth (POAGX) remains a fine choice.
This team-managed fund, which specializes in small and midcap names, is up a strong 54.7% YTD. POAGX — the most aggressive in the three-fund PrimeCap Odyssey roster of choices — favors names in the healthcare and technology sectors, and about 62% of the portfolio is concentrated in these two industries.
The managers use fundamental analysis to discover firms that have compelling growth stories but might be temporarily out of favor. Trading is minimal, with turnover running just 11% annually in this $5 billion fund. Recent top holdings include: Pharmacyclics (PCYC), Seattle Genetics (SGEN), Dreamworks Animation (DWA), Roche Holding (RHHBY) and Qiagen NV (QGEN).
Expenses are low, with POAGX charging just 0.68% annually to access this fine stock-picking team.
YTD Return: 56%
Fidelity Select Health Care (FSPHX) is benefiting from a meaningful commitment to biotech stocks as part of a portfolio focused on the healthcare industry.
The importance of the healthcare industry to our economy is substantial, and is set to grow over time, making this fund a solid long-term bet.
Eddie Yoon leads a team that conducts bottom-up research to uncover firms that represent compelling investments in health care or medicine. This $4.7 billion fund is up a scorching 56% YTD and has worked well over time, up an annualized 12.4% over the past decade.
Current top holdings include Gilead Sciences (GILD), Amgen (AMGN), Actavis (ACT), Biogen (BIIB) and Boston Scientific (BSX).
Expenses run at 0.79% annually.
YTD Return: 65%
Fidelity Select Biotechnology (FBIOX) has achieved fine results this year as the biotechnology sector has been in the spotlight, attracting attention and investor assets as well.
Manager Rajiv Kaul has been on the fund since 2005 and is has positioned the midcap growth fund well in this period.
Up 65% YTD, FBIOX specializes in stocks that pursue promising therapies in personalized medicine and gene therapy. It is a risky yet promising subsector of the healthcare industry. Over time, the results have been rewarding — the fund is up an annualized 14.3% over the last 10 years, according to Morningstar data.
This performance has not gone unnoticed by investors, and fund assets have reached $7.8 billion.
Current top holdings include several of the same names held in FSPHX’s top five — such as Gilead Sciences, Amgen and Biogen — as well as Celgene (CELG) and Regeneron Pharmaceuticals (REGN).
Certainly, FBIOX is a fund with a narrow focus in a risky area of the stock market. However, for investors looking for a way to access the sector using a proven manager, this is a fine mutual fund.
Expenses are 0.81%, and turnover runs a modest 37% over the past year.
YTD Return: 78%
Guggenheim Nasdaq -100 2X Strategy (RYVYX) has also used leverage this year to magnify gains that are impressive — up a robust 79.4% YTD.
This $477 million fund seeks to provide investment returns of 200% of the daily performance of the Nasdaq-100 Index. This team-managed fund uses derivatives to pursue its goals, making it a risky venture not for the faint of heart.
In 2008, RYVYX lost 72.6% of its value — a number that is tough to recover from. This type of product is better suited for active investors and traders that are committed to closely following the performance of this volatile strategy.
The portfolio currently is comprised of 108 stocks, though turnover is a bit high — 71% over the past year. Recent top holdings include: Apple (AAPL), Microsoft (MSFT), Google (GOOG), Amazon (AMZN) and Qualcomm (QCOM).
RYVYX charges $1.78% in annual expenses.
YTD Return: +108%
ProFunds UltraJapan (UJPIX) has had a remarkable year — up an eye-popping 108% to date as the combination of leverage and a bounce in the Japanese stock market has propelled this fund mightily.
The smallish UJPIX (at $58.3 million in assets) tracks a price-weighted index of the 225 most actively traded and liquid stocks traded on the Tokyo Stock Exchange. Current top holdings include: Fast Retailing (FRCOY), Softbank (SFTBF), Fanuc (FANUY), Kyocera (KYO), KDDI (KDDIY) and Honda Motor (HMC).
But there is danger here — like with RYVYX, the use of derivatives and other complex debt instruments here can result in awful results when things head south. For instance, UJPIX lost a crushing 72.6% in 2008.
See, this mutual fund aims to achieve twice the daily price movement of the index it tracks. The key here is daily — the nature of the fund makes it more of a trading vehicle rather than a long-term investment. In fact, the fund has returned an annualized -0.6% over the last decade, according to Morningstar.
That leveraging comes at a cost, as UJPIX charges 1.77% in annual expenses, or $177 per $10,000 invested.
As of this writing, Bill Wysor was long POAGX.
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