These Rebound Funds Could Add Bounce to Your Portfolio

Back in December 2006, I conceived and initiated a novel experiment in mutual fund investing. My "mutts of the funds" strategy extrapolated that the Dogs of the Dow Theory might work on the macro scale.

The contrarian hypothesis, at the individual stock level, favors picking good companies having a bad year. I tested the concept for mutual funds by selecting funds with positive 2005 returns that were well on their way to losing money in 2006.

So, how did the "mutts" do last year? For 2007, the 18 open-end stock mutual funds designated as mutts averaged 11.62%. By way of comparison, the Dow Jones Industrial Average returned 8.88%, the S&P 500 returned 5.49%, and the Nasdaq Composite returned 10.66% for the same period. As you can see in the table below, 13 of the 18 mutts outperformed all these benchmarks. ...