The Daily Screen: Top Financial Sector Funds

Today the Daily Screen zeroes in on funds that fish in the financial-stock pool.

Riding a boost from a string of mergers and stable interest rates, financial sector funds have come back to life after sagging returns in the past couple of years. As tech stocks have cooled, investors have feasted on the financial stocks, which typically are slower growers, but also sell at more modest prices. So far this year, the average financial sector fund is up 12.6%, some 18 percentage points ahead of the S&P 500 index, according to Morningstar.

As usual, we've screened the category for funds that beat the category average over the last one- and three-year periods. The first chart lists the top-10 financial funds, ranked by one-year return.

Then we took our screen a step further, looking at the stocks that have propelled these leading funds. The second table lists the 10 most popular stocks held by the sector's best-performing funds. At the top of the list you'll find behemoths like Citigroup (C), Morgan Stanley Dean Witter (MWD) and American Express (AXP). You'll also find railroad concern Kansas City Southern (KSU), which many funds held as a bet on its former subsidiary, top-selling fund shop Janus.

No doubt some of these funds also own shares of Stilwell Financial (SV), the railroad company's recent spinoff, which bundled Janus, Berger Funds and record-keeper DST Systems.

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Leading Financial Sector Funds
Fund	1-Year Return	3-Year Return*
(FSLBX)Fidelity Select Brokerage & Investment Management	50%	20.6%
(FSPCX)Fidelity Select Insurance	40.6	15.5
(PRISX)T. Rowe Price Financial Service	30.7	13.3
(FIDAX)John Hancock Financial Industries	29.1	9.2
(GFSBX)AIM Global Financial Services	28.7	16.2
(TITNX)Titan Financial Services	24	9.4
(FSFSX)Invesco Financial Services	23.6	11.5
(ICFSX)Icon Financial	21.2	7.9
(RPFGX)Davis Financial	18	12.2
Fidelity Advisor Financial Services	16.4	11.5
Category Average	13.7	7.4
S&P 500	3.9	14.7
Source: Morningstar. Performance through Oct. 10. *Annualized.

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Under the Hood Most popular stocks in the combined portfolios of the 10 funds listed above
Stock	Portfolio Weighting	Funds Owning the Stock
Citigroup (C)	4%	10
Morgan Stanley Dean Witter (MWD)	3.3	9
American Express (AXP)	3.2	8
American International Group (AIG)	2.8	8
Marsh & McLennan (MMC)	2.6	7
Lehman Brothers (LEH)	2.4	7
Bank of New York (BK)	2.3	7
Wells Fargo(WFC)	2.2	8
Kansas City Southern (KSU)	1.9	5
Chase Manhattan Bank (CMB)	1.9	7
Source: Morningstar. Holdings as of most recent portfolio report.

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