China Provides Fertile Ground for Funds

Last year was not a good year for xenophobic investors.

TheStreet.com Ratings' list for the top stock funds in 2006 was dominated by international investments, particularly those in China.

The top five stock funds, as well as eight of the top 10, were invested in China, led by the ( DPCAX Quote)Dreyfus Premier Greater China Fund, which returned an impressive 85.6% for the year.

Despite the high returns from the top 20 funds, only one, (ESMAX Quote)AIM European Small Company A, garnered a rating of A or higher. The low grades for the top earners can be attributed to the volatility of the stocks held in these funds.

Because the international funds on the leader list tend to be more volatile than most stock funds, seven funds on the leader board earned a rating in the "C" range, which is the equivalent of a "hold" recommendation.

Additionally, five of the top funds lacked sufficient history to even be rated.

While the Chinese market was red-hot, things couldn't have been more different for those investing just across the East China Sea.

Three of the bottom 20 performers turned out to be Japan-focused funds, including the (FJSCX Quote)Fidelity Japan Smaller Companies fund, which was down more than 21.5% in 2006.

The list excludes leveraged funds as well as their "inverse" cousins that move in the opposite direction of stock prices, frequently at an accelerated pace.

Such funds are virtually sure things to dominate top and bottom performance rosters, frequently with a leveraged version of a given fund near one end and an inverse version of the same at the opposite end.

Overall, 2006 was generally kind to stock fund investors. Of nearly 14,000 open-end stock funds tracked by TheStreet.com Ratings, only 2.7% failed to have positive returns for the year.

Nearly 70% of the funds recorded double-digit gains, with almost 2,700 funds rewarding investors with returns exceeding 20%.

Stock Fund Leaders and Laggards
Name	Ticker	Investment Objective	2006 Total Return (%)	3-Year Annual Return (%)	TSC Ratings Grade
Leaders
Dreyfus Premier Greater China A	DPCAX	Non-US Equity	85.58	25.61	B+
Oberweis China Opportunities Fund	OBCHX	Non-US Equity	81.17	0.00	U
Old Mutual Clay Finlay China A	OMNAX	Non-US Equity	78.55	0.00	U
J Hancock Greater China Opp B	JCOBX	Non-US Equity	69.15	0.00	U
Columbia Greater China B	NGCBX	Non-US Equity	68.19	27.40	B+
ING Russia A	LETRX	Emerging Market Equity	67.52	44.75	C
Gartmore China Opport A	GOPAX	Non-US Equity	67.26	0.00	U
AllianceBern Greater China 97 A	GCHAX	Non-US Equity	65.53	21.76	B-
Matthews China Fund	MCHFX	Non-US Equity	64.80	22.32	B
MSIF Inc. Intl Real Estate A	MSUAX	Sector - Real Estate	56.06	38.54	A+
US Global Inv World Prec Minerals	UNWPX	Sector - Precious Metals	52.30	26.26	C-
T. Rowe Price Latin America	PRLAX	Non-US Equity	51.24	49.61	C+
US Global Inv Gold Shares	USERX	Sector - Precious Metals	50.19	23.39	C-
ING Greater China Fund A	IFCAX	Non-US Equity	48.77	0.00	U
AIM European Small Company A	ESMAX	Non-US Equity	48.07	42.66	A
Eaton Vance Asian Small Co A	EVASX	Non-US Equity	47.30	26.25	C
Janus Fd Inc-Overseas Fund	JAOSX	Non-US Equity	47.21	32.21	C+
Janus Aspen International Gr Inst	JAIGX	Non-US Equity	47.02	32.26	B
BlackRock Latin America Inv A	MDLTX	Non-US Equity	46.84	48.28	C+
Evergreen Emerging Market Growth I	EMGYX	Emerging Market Equity	46.72	32.05	B-
And Here Are Your Laggards...
Ameritor Investment	AIVTX	Growth - Domestic	-85.71	-69.13	E-
MassMutual Premier Small Co Opp A	DLBMX	Small Cap	-26.39	-5.34	E-
American Heritage Growth Fund	AHEGX	Growth - Domestic	-25.00	-24.61	U
Fidelity Japan Small Companies	FJSCX	Non-US Equity	-21.54	10.69	E-
Rydex Series-Commodities Fund A	RYMEX	Sector - Other	-18.11	0.00	U
BlackRock Real Investment Inv A	MDCDX	Sector - Energy/Natural Res	-16.62	0.00	U
Oppenheimer Real Asset A	QRAAX	Sector - Energy/Natural Res	-13.08	9.53	E-
American Heritage Fund	AHERX	Aggressive Growth	-12.50	-8.04	E-
Rice Hall James Small/Mid Cap Port	RHJMX	Small Cap	-11.32	-0.18	E-
STI Classic Var Tr-Sm Cap Val Eq I		Small Cap	-11.03	7.33	E-
Ameritor Security Trust 1	ASTRX	Aggressive Growth	-10.00	-8.50	E-
Vanguard Str Brd Mrkt Ins plus shs	VSBPX	Growth - Domestic	-9.74	0.00	U
Oak Assoc-Live Oak Health Sciences	LOGSX	Sector - Health/Biotechnology	-9.34	4.37	D-
Fidelity Adv Japan A	FJPAX	Non-US Equity	-9.13	11.60	E+
Gabelli Comstock Partners Strat A	CPFAX	Aggressive Growth	-9.04	-10.74	E-
Pacific Capital MidCap C	PMACX	Mid Cap	-7.05	6.38	D-
Saratoga Adv Tr-Large Cap Growth B	SLGZX	Growth - Domestic	-6.79	3.62	E
STAAR Inv Trust Sm Comp Stock Fund		Small Cap	-6.60	3.45	E
Matthews Japan Fund	MJFOX	Non-US Equity	-6.44	9.45	E
MassMutual Select Aggres Gr A	MMAAX	Aggressive Growth	-6.34	6.90	D-
Excludes leveraged and "inverse" funds. Source: TheStreet.com Ratings