This week's sector-fund analysis marks the third annual winter holiday tradition of looking at the best- and worst-performing socially responsible funds. This year we expanded the list to include a few of the less fortunate sectors without a sufficient number of funds to warrant regular coverage.
By including the food and beverage, gaming and entertainment, health and biotechnology, and leisure industries, we highlight the 10 best- and worst-performing naughty & nice funds. Socially responsible, religiously responsible and Islamic fund categories return from last year. Environmentally responsible funds have been excluded, as they are now regularly covered within the energy group.
The worst-performing fund on our naughty & nice list is the
Ave Maria Opportunity Fund
, which declined 6.45% for the five trading days ending Wednesday, Dec. 24. The fund selects companies believed to be consistent with the core values of the Roman Catholic Church. The largest holding is
SPDR Gold Trust
, at 4.65% of assets. Oil and gas drillers
, down 20.09%, and
, down 19.33%, led the decliners.
One of three socially responsible funds from the same family on today's list,
The Parnassus Fund
, dropped 6.39% for the week. The fund's contrarian strategy targets out-of-favor companies.
Parnassus' holdings of homebuilders
, off 19.64%;
, down 13.20%; and Toll Brothers, off 12.09%; certainly fit the bill. Another position,
Whole Foods Markets
, a leader in organic food retailing, gave back 17.96% on difficulties related to Federal Trade Commission integration blockages of its August 2007 purchase of Wild Oats.
The only naughty fund to make the worst-performing list this week is the
Consumer Discretionary Select Sector SPDR Fund
, whose tracked index has automobiles, clothes, media, hotel and other leisure industry stocks. Share losses of 32.80% at
exceeded the 25.63% drop for the week at
, even though Ford opted out of the Bush administration's delayed-bankruptcy plan amounting to $13.4 billion for GM and Chrysler.
In another extraordinary move last week, the Federal Reserve used emergency powers to convert GMAC to a bank holding company. This move requires Cerberus and GM to liquidate most of their controlling interest in the finance company but frees up funds for dealership and customer car purchases.
All of the funds on the best-performing naughty & nice list are health and biotechnology sector funds. President-elect Obama selected former Senate Majority Leader Tom Daschle to head the Health and Human Services Department. He will also be responsible for delivering Obama's largest social promise as director of the brand new White House Office of Health Reform. There is plenty of naughtiness for Daschle to clean up, such as my dentist wanting to charge more to fill one cavity than my orthopedist charged me for major shoulder surgery.
Three closed-end health and biotechnology funds topped our list of best performers last week. Even after the small gains, all three are selling at significant discounts to their net asset values.
Gabelli Healthcare and Wellness Rx Trust
is selling at a 26.3% discount, while
H&Q Life Sciences Investors
is at 19.1% of NAV and
H&Q Healthcare Investors
is at 18.4%.
Both H&Q funds have top-four holdings of
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Kevin Baker became the senior financial analyst for TSC Ratings upon the August 2006 acquisition of Weiss Ratings by TheStreet.com, covering mutual funds. He joined the Weiss Group in 1997 as a banking and brokerage analyst. In 1999, he created the Weiss Group's first ratings to gauge the level of risk in U.S. equities. Baker received a B.S. degree in management from Rensselaer Polytechnic Institute and an M.B.A. with a finance specialization from Nova Southeastern University.