TheStreet) -- The 10 worst-performing mutual funds are finding that what worked in 2009 is failing this year.
Banks and health-care companies led the stock market last year. But investors took on more risk as 2010 wore on, encouraged by a rebound in corporate profits, particularly in technology, and the government's economic-stimulus plans.
top performer among diversified mutual funds that primarily buy large U.S. companies is
Morgan Stanley Focus Growth
(AMOBX), which has risen 25% this year through Nov. 29. The benchmark
S&P 500 Index has climbed 4.8%.
The worst performers have barely eked out gains.
Invesco Basic Value
(GTVLX) has returned 0.5%, and
(JNTFX) has increased 2.4%.
None of the managers have taken odd or risky positions. They're facing challenges ranging from new management to bad timing on industry bets. Sticking with these funds may require a leap of faith and a bottle of antacids, as they've yo-yo'd over the past three years, losing as much as 52% in 2008, gaining much of it back the following year, then treading water this year.
It didn't take much of a miscue to end up on this list, as just a few clunkers among the top holdings can lead to overall losses. Several managers expected the economy to charge ahead and invested in mega-cap stocks in financial services and computer hardware. But many have been hamstrung from investments in
Bank of America
(BAC - Get Report)
(CSCO - Get Report)
(HPQ - Get Report)
, each of which are down about 20% this year.
Such is the case for Janus fund manager Ron Sachs, who is having a trying year. Three of his funds are on the list.
A lesson to be learned from these funds' travails is that successful mutual-fund management is as much about limiting losses as maximizing gains.
This article's rankings are based on data provided by Morningstar and includes mutual funds with $1 billion or more in assets that are the worst performers in the large-capitalization growth, value or blend (growth and value) categories, with less than 30% of assets in small- or mid-cap stocks. Industry- and country-specific funds are excluded.
In inverse order, here are the 10 worst-performing funds, their key holdings and strategy: