Mutual Fund Rankings, 2017
Despite a host of concerns, stocks shine, with small caps leading the way.
From Kiplinger’s Personal Finance, March 2017
Brexit. Punk earnings. Rising interest rates. A stunning election outcome. Investors have had plenty of reasons to dump stocks over the past year, but the bull market, which celebrates its eighth birthday on March 9, is hanging tough. And although share prices are elevated and political risk is higher than normal, nothing on the horizon suggests the party is about to end.
Tool: Mutual Fund Finder
Large-company stock funds
Value funds stage a comeback.
After leading their smaller brethren in 2014 and 2015, large-cap U.S. stocks lagged last year. Focused funds and funds that own cheap stocks dominated the one-year list. One fund with both attributes was Artisan Value, with 34 stocks and big stakes in energy, technology and basic materials. Results for Kiplinger 25 member Dodge & Cox Stock are uneven, but the fund has delivered stellar long-term gains owning cheap stocks. Among funds that focus on growth stocks, Parnassus Endeavor landed in the top 5% of its peers six times in its 11 full years of existence. The fund, which employs social screens, held 23 stocks, mostly in tech, finance and health care. Tech has helped Fidelity OTC, which invests mainly in firms that trade on Nasdaq.
Midsize-company stock funds
A solid year for mid-cap funds.
The performance of mid-cap funds last year was hardly middling. Thrivent Mid Cap Stock, which invests in growing firms, benefited from a stake in Nvidia, a maker of digital-graphics chips and the biggest gainer in the S Latin America’s top four are from Brazil. Managers at Matthews India look for companies with above-average growth and stocks that trade at moderate valuations—a challenge in India’s overheated market. Hennessy Japan has prospered with a concentrated portfolio of 20 companies; all are based in Japan, but all have a global reach.
Gold glitters once again.
After five straight years of losses, funds that invest in gold-mining stocks sizzled in ’16, gaining an average of 52%. Such funds, though, are more volatile than most—witness the group’s 21% slide in the fourth quarter. If you want to hedge against political uncertainty, consider American Century Global Gold, which charges a reasonable 0.68% per year. Speaking of political uncertainty, investors hammered health care stocks last year, in part over concerns that Congress might force drugmakers to roll back prices. But scientific advances should bolster the companies over the long term, and that should benefit Fidelity Select Biotechnology, which has an excellent long-term record despite losing 24% last year. T. Rowe Price Global Technology is a solid choice for tech exposure.
They’re still trying to justify themselves.
For the most part, funds that own alternative classes, such as commodities or currencies, or engage in short-selling (betting on a security’s price to fall) produced mediocre results last year. Thanks to rising oil prices, though, commodity funds prospered. Pimco CommoditiesPLUS Strategy uses a small portion of its assets to gain exposure to commodities through derivatives, then invests the rest in short-term, high-quality bonds. Last year’s gain follows huge losses in 2014 and 2015. Schwab Hedged Equity, which owns stocks and also sells some short, has been one of the most consistent funds in this category. The fund, which generally relies on Schwab’s proprietary ratings to select stocks, has produced gains in every year but one since 2009.