Best-Performing Stock Funds in January

The best-performing equity mutual funds in January were contrarian funds betting against major stock-market indexes.

With Japan's Nikkei-225 index having fallen 9.8% by Jan. 31 from the end of December, the ProFunds UltraShort Japan Fund(UKPIX) beat all other open-end stock mutual funds, returning an extraordinary 31.2%. The fund tracks the daily inverse returns of the Nikkei-225 index with 200% leverage. Index members whose declines bolstered this fund include Yokogawa Electric(YOKEF), down 28.7%; Mitsubishi Electric(MIELY), minus 23.9%; and Yahoo! Japan(YAHOF), down 20.6%.

Closer to home are three inverse funds with "buy" ratings making our list by shorting stocks both small and large.

Smaller U.S. stocks, as measured by the 11.1% decline in the Russell 2000 Index, gave more ground than the 8.7% decline in the Dow Jones Industrial Average in January.

Returning 18.1% for the month, the ProFunds Ultra Short Small-Cap ProFund(UCPIX) lived up to its "buy" rating of B. This 200% leveraged inverse fund ascends as members of the Russell 2000 descend. Small-cap decliners providing some of the largest contributions were Hayes Lemmerz International(HAYZ), crashing 80.0%; Colonial BancGroup(CNB), falling 61.8%; ION Geophysical(IO), dropping 56.3%; and La-Z-Boy(LZB), down 55.3%.

The two "buy"-rated funds leveraged 200% to the opposite performance of the Dow Jones Industrial Average are the Rydex Inverse Dow 2x Strategy Fund(RYCWX), at A; and the ProFunds Ultra Short Dow 30 ProFund(UWPIX) at A-.

Dow Industrial damage was led by a 53.3% decline from Bank of America(BAC), a drop of 47% from Citigroup(C), minus 30.8% from Alcoa(AA), a decline of 30.2% from Caterpillar(CAT) and a drop of 25.1% from General Electric(GE).

The broader S&P 500 Index shed 8.4% for the month, and the 250% leveraged inverse fund, Direxion S&P 500 Bear 2.5X Fund(DXSSX), jumped 18.1%. No index members lost more than the 71.1% decline of Fifth Third Bancorp(FITB), minus 62.4% in Huntington Bancshares OH(HBAN), minus 58.5% in SunTrust Banks(STI), minus 58.1% in Marshall & Ilsley(MI) and minus 56.5% in Regions Financial(RF).