Mutual Fund Investing
Top Funds: Banks Out, Financial Services In
Richard Widows
10/02/08 - 12:04 PM EDT
Considering the fates met by one-time banking giants Wachovia (WB Quote), Washington Mutual (WM Quote) and IndyMac and not to mention Countrywide Financial, Lehman Brothers and AIG (AIG Quote), it would seem financial services mutual funds were the last places in which an investor should have been in recent months, right?
Wrong!
Excluding leveraged and "inverse" funds, which because of their unique structures virtually always dominate the upper and lower extremes of performance arrays, the six best open-end stock mutual funds in the third quarter were specialists in financial services.
And to add proof that contrary investing was carried to an extreme during the period, a pair of funds focusing on the much maligned real estate sector also made the accompanying table of the 10 best performing stock funds for quarter just ended -- excluding the leveraged and inverse players.
Investors who got into -- or already owned and decided to stick with--the financial services firms on the adjoining list during the summer financial maelstrom were rewarded double-digit percentage gains for their anguish.
Two of the financial services funds, John Hancock Regional Bank (FRBAX Quote) and Forward Banking & Finance (HSSAX Quote), each vaulted more than 20% during the quarter. Both are heavily invested in regional banking firms, as is FBR Small-Cap Financial Fund (FBRSX Quote), which also holds small mortgage and investment stocks.
The Rydex Series-Banking Fund (RYKAX Quote) achieved a gain of 12.1% during the quarter with more mainstream holdings such as Wells Fargo (WFC Quote), US Bancorp (USB Quote), HSBC (HBC Quote) and Bank of America (BAC Quote).
Slightly more diversified within the financial sector than RYKAX is the Burnham Financial Industries Fund (BURFX Quote), which in addition to banking firms such as Citigroup (C Quote) and JPMorgan Chase (JPM Quote), holds Met Life Insurance(MET Quote) and Ameriprise Financial(AMP Quote).
The only general investment fund on the list, Ridgewood Large-Cap Growth Stock (STCIX Quote), advanced 11.4% during the quarter with investments in blue-chip stocks such as IBM (IBM Quote), Google (GOOG Quote), Microsoft (MSFT Quote), Apple (AAPL Quote), Intel (INTC Quote) and Baxter International (BAX Quote).
Ridgewood Large-Cap Growth is the only fund in the table with gains for the latest quarter, the most recent 12 months and the past three years.
| Surprise! Financial Funds Have Been Hot in 2008 |
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| Name (Ticker), Rating | INVESTMENT OBJECTIVE | 3-Month Total Return (%) | 12-Month Total Return (%) | 3-Year Annual Return (%) | Minimum Initial Investment |
| J Hancock Regional Bank A (FRBAX), E- * | Financial Service | 24.45 | -20.07 | -3.19 | 1,000 |
| Forward Banking & Finance A (HSSAX), E- * | Financial Service | 22.65 | -14.20 | -5.05 | 4,000 |
| FBR Small Cap Financial Fd (FBRSX), E- | Financial Service | 14.49 | -7.14 | -3.63 | 2,000 |
| Rydex Series-Banking Adv (RYKAX), E- | Financial Service | 12.11 | -35.46 | -13.40 | 2,500 |
| Burnham Financial Services A (BURKX), E * | Financial Service | 11.90 | -11.95 | -0.42 | 2,500 |
| Burnham Financial Industries A (BURFX), C+ * | Financial Service | 11.72 | -4.59 | 6.72 | 2,500 |
| RidgeWorth Lrg-Cap Growth Stock A (STCIX), D+ * | Growth-Large Cap | 11.36 | 0.06 | 8.54 | 2,000 |
| Hilliard-Lyons Senbanc Fund (SENBX), E- | Financial Service | 10.51 | -37.03 | -14.62 | 250 |
| Neuberger Berman Real Estate Fund (NBRFX), C | Real Estate | 10.11 | -7.38 | 6.95 | 1,000 |
| Stratton Monthly Dividend Reit Shs (STMDX), C- | Real Estate | 9.29 | -5.93 | 4.58 | 2,000 |
| * Front-end sales charge indicated. Data as of 9/30/2008. Source: TheStreet.com Ratings & Bloomberg For more information, check out an explanation of our ratings. |
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