Last month we purchased Fidelity Limited Term Bond (FJRLX) in our model portfolio. Part of our strat...
Some Recent Market-Beating Funds
10/30/2007 12:00 am EST
Ivan Martchev, associate editor of Personal Finance, discusses the leaders and laggards among the mutual funds he recommends.
We don't try to beat the market every quarter with our mutual fund portfolio. We focus on investment themes that work over a three- to five-year time frame to achieve superior performance.
The fund managers we choose time the market and make individual stock selections, while we try to stick with the right investment themes. But regardless of its long-term approach, the portfolio beat the market handily in the past quarter. The Standard & Poor's 500 was up 2% on a dividend-reinvested basis, while the portfolio was up 7% on the strength of our natural resource-focused funds.
American Century Global Gold (BGEIX), the best-performing fund, was up 18.7%. Because of the manager's style, it usually starts slow but, as rallies progress, ranks consistently better in its category. This is due to the fund's focus on larger stocks that may be out of favor in the sector.
The portfolio is run with a contrarian style but with excellent long-term returns. If you want a more aggressive fund in that sector, look at The Midas Fund (MIDSX). The stocks in that fund are smaller and move faster, but they also tend to have bigger corrections. Over the long term, both funds' returns have been of similar quality.
The second-best performer for the quarter was PIMCO Commodity RealReturn Strategy D (PCRDX), which was up 9.8% on the heels of all-time highs in several commodity indexes. This fund, [which] can only be purchased through a broker, is designed to meet or beat the performance of the Dow Jones-AIG Total Returns Commodity Index, one of the better indexes that measures sector performance.
Fidelity Select Energy Portfolio (FSENX) was up 8.6% in the quarter with the all-time highs in crude oil. Demand for gasoline tends to decrease in the winter months; the summer driving season no longer pushes demand, and heating oil isn't as large a market to compensate for the drop. But you should stay with the fund and use the slower winter months to build positions for the long haul.
We also saw commendable performances from T Rowe Price Health Sciences Fund (PRHSX), which was up 5.7%, and Hussman Strategic Growth Fund (HSGFX), which was up 3.1%.
Only one fund in the Portfolio underperformed the S&P 500: longstanding recommendation Meridian Value (MVALX). Meridian Value concentrates on small-cap stocks, which tend to decline more during corrections. But the long-term returns have been excellent; the fund has frequently underperformed the S&P 500 for a quarter or two, but it still manages to deliver solid annual performance.
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