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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 )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)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)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

Richard Widows is a financial analyst for TheStreet.com Ratings. Prior to joining TheStreet.com, Widows was senior product manager for quantitative analytics at Thomson Financial. After receiving an M.B.A. from Santa Clara University in California, his career included development of investment information systems at data firms, including the Lipper division of Reuters. His international experience includes assignments in the U.K. and East Asia.

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