Biggest Equity-Fund Ratings Changes

Betting on a bear market has paid off, with significantly higher grades from TheStreet.com Ratings for some equity mutual funds.

As the stock market continued to shrivel during the year's second quarter, four of the five funds on the "most improved" list of the accompanying table earned impressive grade elevations from TheStreet.com Ratings by moving inversely to the general list.

The table lists the five equity mutual funds with the largest improvements and the quintet with the largest downgrades for the quarter ended June 30.

On the "most improved" section of the table, the Leuthold Grizzly Fund(GRZZX Quote), the PIMCO StocksPLUS TR Short Strategy Fund(PSSAX Quote), The ProFunds-Bear Fund(BRPIX Quote) and the Rydex Inverse S&P 500 Strategy Fund(RYARX Quote) -- each of which moves opposite the direction of the general stock market -- all ended the first half of the year with double-digit gains. For the latest 12-months, the four funds have achieved even bigger totals.

Their gains contrast sharply with double-digit negative returns for the S&P 500 total-return index for the year to date and past 12 months. And although their computer-generated grades issued by TheSteet.com's objective evaluation system have spurted higher as a result of the bear market, investors should be cautioned that a reversal into a sustained bull market would result in painful losses for such "inverse" funds.

The fifth fund in the "most improved" grouping, the GMO Alpha Only Fund III(GGHEX Quote), earned its grade improvement in a more tortoise-like fashion, with slow and steady progress during the current period of high-amplitude markets bounces and tumbles.

An institutional fund that exhibits virtually no correlation with the general market, GGHEX has been consistently running up positive performance numbers slightly better than a typical money market fund. Its consistency of returns explains, for the most part, its advance from a "C" grade, which equates with a "hold" recommendation, to the highest possible mark of A+, which places it squarely in the "buy" recommended category.

Despite suffering year to date and 12-month losses less severe than the S&P 500, four of the five funds on the "most deteriorated" list suffered diminutions in their grades because of volatility of returns.

The one highly downgraded fund in the table with double-digit setbacks for the year to date and 12 months, the Fidelity Select Defense & Aerospace Fund(FSDAX Quote), moved southward with the aerospace industry.

Its largest holdings -- which have mostly eroded in value over the past year -- include United Technologies(UTX Quote), Boeing(BA Quote), Honeywell International(HON Quote), Lockheed Martin(LMT Quote)LMT and Northrop Grumman(NOC Quote).

Even though it lost two full grade levels during the quarter, the Columbia Select Large Cap Growth Fund(ELGAX Quote), with a current grade of C+, remains in the "hold" range -- just a tick away from a "B-" grade that would elevate it to a "buy" recommendation.

ELGAX's largest portfolio positions, although volatile over the past year, have generally held onto their respective values. They include Google(GOOG Quote), Apple(AAPL Quote), Research In Motion(RIMM Quote), Gilead Sciences(GILD Quote) and Qualcomm(QCOM Quote).

Biggest Recent Equity Fund Grade Changes By TheStreet.com Ratings
NAME, TICKER & TheStreet.com RATINGS GRADE	PREV. GRADE	YR.-TO- DATE TOTAL RET'N (%)	12-MO. TOTAL RET'N (%)	3-YR. ANN'L RET'N (%)	MAX. INIT. SALES CHG. ($)
MOST IMPROVED
Leuthold Grizzly Short Fund (GRZZX) B	E+	29.82	46.30	3.40	0.00
PIMCO StocksPLUS Tr Sh Strat A (PSSAX) A	D+	14.64	27.22	2.83	3.75
ProFunds-Bear Fund Inv (BRPIX) B	D-	13.44	18.01	0.94	0.00
GMO Alpha Only Fund III (GGHEX) A+ *	C	1.65	4.41	3.98	0.10
Rydex Ser-Inv S&P 500 Stgry A (RYARX) B+	D	13.33	17.83	0.99	4.75
MOST DETERIORATED
ING Solution 2015 Portfolio Class A (ISOAX) E	C+	-6.53	-6.23	3.83	0.00
Fidelity Select Defense & Aerospace (FSDAX) D	B	-21.53	-16.84	6.34	0.00
ING GET U.S. Core Portfolio -Ser 6 (IGUHX) E- **	C-	-6.96	-7.92	2.79	0.00
Columbia Sel Large Cap Gr A (ELGAX) C+	A+	-9.31	2.63	10.30	5.75
Columbia Sel Opportunities A (EEOAX) C+	A+	-5.84	-3.20	10.45	5.75
S&P 500 Composite Total Return		-11.91	-13.12	4.40
* Institutional fund with $10 million minimum initial investment. ** Currently closed to new investors. Source: TheStreet.com Ratings - Data as of 6/30/2008. For an explanation of our ratings, click here.