TheStreet.com Ratings: Recession-Proof Funds

If the U.S. economy is really headed for a recession, you'll want to take shelter in investments that are relatively safe and offer steady yields.

I've been predicting a rate cut since late last year. While those calls may have been premature, the bond market is clearly signaling that interest rates will fall going forward. Meanwhile, equities are getting clobbered amid a selloff in overseas markets and concerns about the subprime contagion here at home.

Federal Reserve Chairman Ben Bernanke himself was quoted earlier this year as saying something to the effect that "the markets have had a pretty good run." Translation: asset prices need to correct.

What is an investor to do in this climate, particularly if the market turmoil has only just begun? The following general types of investments provide yield and are more likely to weather the recession/slowdown that former Fed chief Alan Greenspan has mentioned:

• U.S. government bonds are the ultimate safe haven, since everyone expects Uncle Sam will still make good on his debts if the economy heads south.
• Investment-grade corporate bonds can be considered nearly as safe as Treasuries, since well-established companies with large market shares are likely to hold up relatively well in an economic downturn. These bonds also pay more interest than Treasuries.
• Utility and infrastructure stocks have earnings that are relatively steady because demand for their services is relatively inelastic.
• Municipal bonds are somewhat vulnerable to a weakening economy since the local entities that issue them are dependent on tax revenues. Investors who want to be more conservative may want to consider insured munis, while those who are willing to bet on the continued strength of the jobs market could venture further afield.

The point is that investors should avoid risk. Some would argue that this should be the natural state for all investors at all times, but in recent years more and more investors have become increasingly comfortable with risk taking and price discovery because the economy seemed so resilient. That's fine as long as you don't discover that the price you paid was too high.

Below are a few of the top-rated funds in each of the areas I've highlighted.

Top-Rated Utility Funds Performance figures are for the period ending Feb. 28
Name	Ticker	TSC Rating	1-Month Return	6-Month Return	1-Year Return
Eaton Vance Utilities I	EIUTX	A+	1.26	13.67	24.89
Gartmore Global Utilities R	GLURX	A+	-0.3	16.57	29.59
MFS Utilities Fund I	MMUIX	A+	1.88	18.5	31.29
Fidelity Select Utilities Growth	FSUTX	A+	5.09	16.23	26.96
Fidelity Adv Utilities B	FAUBX	A+	5.65	16.97	28.39
Gabelli Global Utility&Income Trust	GLU	A+	0.93	19.55	25.68
PowerShares Dynamic Utilities	PUI	A	5.41	11.56	19.81
iShares Dow Jones US Utilities	IDU	A	6.13	13.92	22.57
SPDR Utilities	XLU	A	6.68	14.63	22.81
Cohen&Steers Select Utility Fund	UTF	A	5.55	17.64	28.81
Source: TheStreet.com Ratings

Top-Rated Municipal Bond Funds Performance figures are for the period ending Feb. 28
Name	Ticker	The Street.com Rating	1-Month Return	6-Month Return	1-Year Return
Single-State Municipals
Oppenheimer Ltd Term CA Muni B	OLCBX	A+	0.79	2.69	5.09
Evergreen High Income Muni I	EFHYX	A+	1.15	3.5	6.08
Colorado Bond Shares Tax-Exempt A	HICOX	A+	0.11	2.21	5.1
Legg Mason Prt NJ Municipals B	SNJBX	A+	1	2.55	6.01
Sit MN Tax Free Income	SMTFX	A+	0.81	2.46	4.96
National Municipals
Legg Mason Prt Mgd Mncpls I	SMMYX	A+	1	2.58	6.63
Oppenheimer Limited Term Muni C	OITCX	A+	0.72	2.43	4.52
Evergreen Strategic Muni I	VMPYX	A+	0.52	2.07	4.08
MSIF Trust Municipal Inst	MPMFX	A+	0.94	2.78	4.91
Wells Fargo Avtg ST Muni Bd Inv	STSMX	A+	0.39	1.83	3.68
Insured Municipals
Sit Florida Tax-Free Income Fund	SFLIX	A+	0.68	2.12	3.95
Wells Fargo Avtg Ult-Sh Muni I	SMAIX	A	0.3	1.92	3.77
Federated Muni Ultrashrt Inst	FMUSX	A	0.4	1.82	3.72
First American MN Interm T/F Y	FAMTX	B+	1.04	2.41	4.22
Franklin MI Ins Tax-Free Inc B	FBMIX	B+	1.05	2.3	3.76
High-Yield Municipals
Legg Mason Prt Muni High Inc B	SXMTX	A+	1.27	3.72	9.46
American Century High Yld Muni Inv	ABHYX	A+	1.03	3.83	6.86
Waddell & Reed Adv Muni High Inc Y	WYMHX	A+	0.99	3.18	7.04
AIM High Income Muni C	AHMCX	A+	1.22	3.54	6.79
T. Rowe Price Tax Free High Yld	PRFHX	A+	1.06	3.57	6.67
Source: TheStreet.com Ratings

Top-Rated Taxable Bond Funds Performance figures are for the period ending Feb. 28
Name	Ticker	The Street.com Rating	1-Month Return	6-Month Return	1-Year Return
U.S. Govt - Short Term & Interm.
FFTW US Short-Term Portfolio	FFSTX	A-	0.3	2.55	5.05
Touchstone Ut Sh Dr FI Inc Z	TSDOX	A-	0.4	2.92	5.54
Managers Short Dur Govt Fund	MGSDX	B+	0.47	2.44	4.89
Federated Gov Ultrash Dur Inst	FGUSX	B+	0.42	2.79	5.29
U.S. Govt - Long Term
STI Classic Ltd Dur I	SAMLX	B+	0.39	2.47	4.96
Legg Mason Prt Sh-Term Inv Grd Bd I	SBSYX	C+	1.12	3.18	5.24
Permanent Portfolio Treasury	PRTBX	C	0.32	1.99	3.95
American Century Tgt Mat.-2025 Inv	BTTRX	C	4.76	5.36	1.59
TIAA-CREF Short Term Bond	TCSTX	C	1.05	2.85	5.3
Investment-Grade Corporates
RMK Sel Intermediate Bond I	RIBIX	A+	1.04	3.94	7.64
Wells Fargo Avtg Ult-Sh Dur Bd Z	STGBX	B	0.49	2.58	4.95
Gartmore Sh Duration Bond Inst	MCAIX	B	0.82	2.6	4.94
Federated Tot Ret Bd Inst	FTRBX	B-	1.47	3.79	5.9
Diamond Hill Strategic Income I	DHSTX	B-	0.89	6.95	10.85
Source: TheStreet.com Ratings

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