Try These Correction-Resistant Funds

With the stock market lingering in a stasis between "correction" and "bear market," mutual fund investors are likely to be looking around for vehicles with equity exposure for participation in case the bulls prevail, while at the same time offering some resistance to the southerly course that prices have taken in recent months.

Funds that moved ahead at an annual pace of at least 6% during the five-year period ended in October -- which on a month-end-basis corresponded with the 2002-07 bull market -- appear in an accompanying table. Of particular interest, however, is that each of the equity and hybrid funds on the list has managed to maintain upward movements despite the severe downdrafts of the past three months.

Ten of the 14 "correction resistors" in the table rewarded investors with double-digit annual returns during the five-year bull market. All 10 achieved returns surpassing the annualized 14.35% total annual reinvested return of the S&P 500 for the period.

In fact, the average annualized return for all 14 funds in the group was seven percentage points higher than that of the S&P.

Six of these funds that are of the asset-allocation variety have maintained their positive returns by preserving favorable balances of equities and other vehicles -- primarily fixed-income investments. While skillful mixing of various types of investments can provide these funds with buffers against shocks in the stock market, holdings of fixed-income securities usually dampen the overall gains of such funds during periods of rapidly advancing stock prices.

Five funds on the list specialize in precious metals, which have been steadily appreciating in value in recent years. Gold has continued to move higher during the stock market setbacks of recent months.

But while some precious metals analysts assert that gold still has a very long way to go, thanks to demand from newly prosperous Asians as well as non-Asians worried about inflation, the precious metals funds lack sector diversification. While it has been profitable in recent years, heavy portfolio concentration in this sector amounts to "putting all your eggs in one basket."

One basket in which few would currently expect to find a fresh egg would be financial services. Surprisingly, a fund specializing in that sector found its way onto the list. By eschewing the big guns of finance that have been blindsided by the subprime implosion, the FBR Small Cap Financial Fund(FBRSX Quote - Cramer on FBRSX - Stock Picks) has remained in positive territory over the past three months.

FBRSX's largest portfolio holdings are Hudson City Bancorp(HCBX Quote - Cramer on HCBX - Stock Picks) and Washington Federal(WFSL Quote - Cramer on WFSL - Stock Picks).

That leaves two truly diversified equity-focused funds on the list of those with respectable returns during the bull market and the more recent three-month downturn.

API Trust-Value C(YCVTX Quote - Cramer on YCVTX - Stock Picks) rewarded investors at an annual rate of 21.35% during the five-year bull market period through Oct. 31, 2007. For the most recent three months, it held onto a respectable total return of 3.72%. Its largest holdings are the SPDR S&P Emerging Asia-Pacific ETF(GMF Quote - Cramer on GMF - Stock Picks) and Deere & Co.(DE Quote - Cramer on DE - Stock Picks).

While YCVTX's total annual expense ratio is a mainstream 1.51%, it allows new investors in for a minimum initial commitment of only $1,000. The other diversified equity-focused fund on the list, the Clipper Fund(CFIMX Quote - Cramer on CFIMX - Stock Picks), lets its investors off relatively easy with a total annual expense ratio of only 0.70%. But the entry cost is somewhat steep; a minimum initial investment of $25,000.

The Clipper Fund concentrates on just a handful of stocks, recently just a hair over 20. But its choices have helped boost its total reinvested return for the three-month period ended Jan. 31 to 3.24%, far better than the 10.55% loss suffered by the S&P 500 total return index.

CFIMX's top portfolio holdings are ConocoPhillips(COP Quote - Cramer on COP - Stock Picks) and American International Group(AIG Quote - Cramer on AIG - Stock Picks).

NAME, TICKER & TheStreet.com RATINGS GRADE	INVESTMENT OBJECTIVE	3-MO. TOTAL RET'N (%)	BULL MARKET ANN'L RET'N (%) *	TOTAL ANN'L EXP. RATIO (%)	SALES CHARGE TYPE
API Trust-Value C (YCVTX) C-	Growth - Domestic	3.72	21.35	1.51	Level Load
Clipper Fund (CFIMX) D	Growth - Domestic	3.24	9.19	0.70	No Load
DWS Gold & Prec Metals Fund A (SGDAX) C-	Sector - Precious Metals	0.03	35.65	1.52	Front Load
Evergreen Precious Metals A (EKWAX) C	Sector - Precious Metals	1.46	37.43	1.17	Front Load
FBR Small Cap Financial Fd (FBRSX) E-	Sector - Financial Services	2.55	8.18	1.53	No Load
Federated Market Opportunity A (FMAAX) D	Asset Allocation - Domestic	5.02	7.33	1.48	Front Load
First Eagle Gold Fund A (SGGDX) C-	Sector - Precious Metals	2.75	27.02	1.22	Front Load
Ivy Fund-Asset Strategy A (WASAX) A+	Asset Allocation - Domestic	0.10	21.27	1.12	Front Load
Manning & Napier Pro-Blend Con Term (EXDAX) C	Asset Allocation - Domestic	0.14	6.72	1.08	No Load
Oppenheimer Comm Str Tot Retn A (QRAAX) C-	Asset Allocation - Domestic	1.30	17.55	1.54	Front Load
Permanent Portfolio Fund (PRPFX) A+	Asset Allocation - Domestic	2.05	14.41	1.11	No Load
US Global Inv Gold Shares (USERX) C+	Sector - Precious Metals	12.17	38.88	1.29	No Load
USAA Precious Metals & Minerals Fd (USAGX) C+	Sector - Precious Metals	0.60	38.59	1.21	No Load
Waddell & Reed Adv Asset Strat A (UNASX) A-	Asset Allocation - Domestic	0.66	21.88	1.21	Front Load
Group Averages		2.55	21.82	1.26
S&P 500 Total Return Index		-10.55	14.35
* Five-year annualized return, 10/31/2002 through 10/31/2007. Source: TheStreet.com Ratings - Data as of 1/31/2007.