Mutual-Fund Mavericks Beat Benchmarks
BOSTON (TheStreet) -- Whoever said it's best for a mutual-fund manager to follow the investment herd may have another thing coming.
That's because investors at three diversified stock funds have managed to post five- and
that are among the best by being mavericks. The
S&P 500 Index
, the benchmark for U.S. stocks, has fallen 9% since December 2000.
One is the
Prudential Jennison Natural Resources Fund
(PRGNX) - Get Report
, with a 19%, 10-year annualized increase, and a 15%, 15-year gain. Think of the compounded returns its long-term investors have. It's getting the job done dancing through the commodities-investing minefield.
Then there's
FPA Crescent Fund
(FPACX) - Get Report
, with a 12%, 10-year annualized advance and an 11%, 15-year return. Its steady increases come from a bizarre portfolio mix, one that currently includes U.S. Treasury bonds, a stake in a Malaysian resort developer, some shorted stocks and a healthy dose of U.S. blue-chips.
And, finally, there's the
Intrepid Small Cap Fund
(ICMAX) - Get Report
, with a 14% five-year annualized return that ranks first out of the 6,897 U.S. stock funds tracked by Morningstar. Its performance is due to a value-oriented investment approach resulting in below-the-radar stocks, each with their own appeal, whether it's as a cash cow or as the owner of a business niche.
A synopsis of each fund and a graphic of one of its top picks follows:
Prudential Jennison Natural Resources Fund
(FPACX) - Get Report
, with $5.5 billion in assets and a 19% 10-year annualized return, has 120 stocks and a buy-and-hold strategy, as indicated by its 9% annual turnover. A 100% annual turnover means the portfolio has changed completely in a year.
The Prudential Jennison Natural Resources Fund has a 58% energy weighting, led by a 2.7% stake in Colombia-based
Pacific Rubiales Energy
(PRE)
. Its stock is up 117% this year.
The fund has a 41% industrial-materials allocation, driven by
Freeport-McMoRan Copper & Gold
(FCX) - Get Report
, at 2.3% of the fund and with a 45% gain this year.
Indicative of manager David Kiefer's confidence and industry insights, the mutual fund bought a block of
Concho Resources
(CXO) - Get Report
, a Texas independent oil and natural gas company, at its 2007 initial public offering. It represents 1.9% of the fund and is up 90% this year. Given that its shares were bought at IPO prices almost four years ago, it's going to be a big pay day when the fund cashes out.
Another of its top-returning picks is Canadian gold miner
Semafo
(SMF)
, at 1.6% of the fund. It's up 165% this year.
FPA Crescent Fund
(FPACX) - Get Report
, with $4.4 billion in assets, is a truly go-anywhere fund, but probably deserves a "don't try this at home" warning label for those who would want to emulate its portfolio structure.
This year, the mutual fund is running even with the
Standard & Poor's 500 Index's
11% return after a gain of 28% in 2009 and a loss of only 21% in 2008. It boasts a 12% 10-year annualized return.
Manager Steven Romick, a dyed-in-the-wool value investor, has a third of the fund in cash and 14% in bonds, including U.S. Treasuries and $77 million of
Citigroup
(C) - Get Report
. It includes a 1.6% allocation to a
Capital Automotive
term loan and a 1% allocation to shares of
Genting Malaysia Berhad
, a leisure and hospitality company that trades on Asian exchanges. It has a 21% return this year.
The FPA Crescent Fund includes 42 bonds, 39 stocks held long, including a number of blue-chips, and 28 stocks that are shorted, a strategy that pays off when they fall in value. The stocks held long include: health-care-products giant
Johnson & Johnson
(JNJ) - Get Report
, insurer
Aon
(AON) - Get Report
, software maker
Microsoft
(MSFT) - Get Report
,
Kraft Foods
( KFT) and
Abbott Labs
(ABT) - Get Report
.
The fund has a moderately low 32% annual turnover, which indicates it tends to stick by its picks.
Its best-performing stock is
PetSmart
(PETM)
, with a 50% return. The company comprises 1.9% of the fund. PetSmart is the leading retailer, with a 12% share in the $45 billion U.S. pet-supply market.
The
Intrepid Small Cap Fund
(ICMAX) - Get Report
, with $691 million in assets, has been able to post its superior 5-year record -- a 14% annualized return -- due to its managers' stock-picking abilities. The fund stayed on a steady keel throughout the market turmoil of the past few years, losing a mere 7.1% in 2008 and then gaining 40% in 2009. It's up 18% this year, despite a stock portfolio with no particularly awesome returns.
The fund includes 51 stocks and has an annual turnover of 61%.
The Intrepid Small Cap Fund's largest stock holding, at 3.5% of assrts, is
Tidewater
(TDW) - Get Report
, which operates a fleet that ferries supplies and personnel to offshore oil rigs. It's up 10% this year, despite the limitations placed on the offshore oil industry after the
BP
(BP) - Get Report
oil-rig disaster in the Gulf of Mexico.
The fund's second-largest position, at 3.4% of the fund, is convenience-store distributor
Core-Mark Holding
(CORE) - Get Report
, which is also up 10% this year. Its business is delivering goods to grocery, liquor and convenience stores, a customer base that allowed it to weather the economic downturn with nary a blip. And the company has room to grow, as it has yet to enter the Northeast.
Intrepid's third-largest stock is
Weis Markets
(WMK) - Get Report
, at 3% of the fund. It's up 12% this year. It's a 165-store retail grocery chain with a market value of $1 billion that operates in small markets in Pennsylvania and surrounding states. It sounds like a yawner, but since it operates in markets that don't attract the category-killers such as
Wal-Mart
(WMT) - Get Report
, it has increasing same-store sales. And it has a sterling balance sheet that includes: no debt, cash equal to $4.82 per share, a strong and steady cash flow, and it owns the real estate under half its stores.
The fund's biggest return this year comes from the rent-to-own furniture and appliance store chain
Rent-a-Center
(RCII) - Get Report
, up 70%. It's a been a good bet in a bad economy, given the number of low- income consumers who can't afford to furnish their homes any other way. The company has a low forward price-to-earnings ratio of 10, versus 14.3 for the
Standard & Poor's 500
, low debt and good cash flow.