by Bill Wysor | January 29, 2014 3:00 pm
The numbers from last year were impressive — investors only had to buy S&P 500-tracking mutual funds to realize a very profitable year in 2013. With dividends reinvested, the market was up just more than 32% as virtually everyone was caught off guard by the strength and breadth of the move.
But the great year enjoyed by the U.S. stock market left behind other markets in the world — the Vanguard Total International Index fund gained just 15% last year. Emerging markets dragged down overseas results as well and are off to a rough start in 2014.
Leadership is always changing, and there are interesting possibilities overseas that might play out well as 2014 unfolds.
Here are three well-managed no-load mutual funds that might benefit as other markets in the world continue to right their economic ships:
Have you noticed something missing in the media? There is virtually no coverage of European sovereign debt issues that once dominated the airwaves. It is clear that problems are still present — but the worst might be over and opportunities certainly do exist in Europe.
So how is the average investor able to capitalize on this play?
T. Rowe Price European Stock (PRESX) is a well-managed fund that has a disciplined, focused approach. Manager Dean Tenerelli has been on this assignment since 2005 and runs a large-cap offering that currently owns 74 stocks. His growth-at a-reasonable-price approach has served investors well during the past year, with the fund up 26.6% for the past 52 weeks. During the past five years, the fund is up an annualized 19.1%, which lands it in the top 14% of mutual funds in its Morningstar category.
Financial stocks currently account for 25% of the portfolio, followed by consumer discretionary names at 20%. In terms of country diversification, stocks from the United Kingdom comprise 19% of PRESX, with 15% in Spanish companies and 14% in stocks domiciled in Switzerland. Recent top holdings included the following names: Amadeus (AMADF), Anheuser-Busch InBev (ABV), Bankia SA (BNKXF), Cie Financiere Richemont (CFRHF) and Gas Natural (GASNY).
Annual turnover is just 18% on this $1.5 billion fund that mixes “growth” and “value” stocks with great ease. Meanwhile, PRESX features a below-category-average expense ratio of 1%, or $100 annually for every $10,000 invested.
For investors interested in the recovery in Japanese stocks, Fidelity Japan Smaller Companies (FJSCX) is a compelling fund that had a great year in 2013 — up a robust 52%, or nearly twice the iShares MSCI Japan ETF (EWJ).
This $630 million fund is a risky option, but under the guidance of lead manager Nicholas Price, FJSCX is posting a very solid performance — up an annualized 17% over the past five years and ranked in the top 1% of all mutual funds in this Morningstar category.
Listed as a midcap fund, Price holds 88 stocks in the portfolio and trades rather often — with annual turnover of 91%. The portfolio recently was positioned with a 28% stake in consumer discretionary names and 26% in financials. Current top holdings include Orix (IX), Tokyo Tatemono (TYTMF), Pigeon Corp. (PGENY), Rakuten (RKUNF).
A reasonable expense ratio of 1.01% makes FJSCX an appealing way to claim a slice of the Japanese recovery story.
Matthews Asia Small Companies (MSMLX) is a quality mutual fund that felt the impact last year of the weakness in Chinese stocks. This fund invests in Asian markets (with the exception of Japan), and it has gained just 2.2% during the past 12 months.
Still, manager Lydia So is a fine manager who has positioned MSMLX in the top 1% of its Morningstar category during the past five years — even with last year’s hiccup, the fund has returned an annualized 25.3% in that time. Currently 27% of the fund is invested in China, with 15% in India and 12% devoted to Taiwan. In terms of sector weightings, industrial names are 18% of the portfolio while financials account for 17%.
The fund recently held the following as top positions: Towngas China (TGASF), St. Shine Optical, PChome Online and Vitasoy (VTSYF).
MSMLX is classified as a midcap offering by Morningstar and has a reasonable asset base of $452 million, which gives the manager flexibility in positioning the fund. Expenses run 1.5%.
As of this writing, Bill Wysor did not hold a position in any of the aforementioned securities.
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