(To update with comments from EPFR Global regarding fund flows.)
) -- In what's been a brutal year for the mutual fund industry, managers including Robert Goldfarb, William Joyce and Tom Ognar earned their keep and served as examples for more well-known peers and up-and-comers.
Large-cap stock funds are on pace to finish well behind the benchmark
1.7% decline, with most set to close out 2011 with
have posted big losses this year, with the once-high-flying Heebner of the
CGM Focus Fund
down 28%. CGM Focus generated an 80% return in 2007, the best performance by a U.S. equity fund.
says 72% of the of the 261 large-cap core funds (main portfolio holdings) are falling short of their benchmarks this year. Meanwhile, 62% of the 110 large-cap value funds are trailing, while 84% of large-cap growth funds are underperforming.
S&P Capital IQ analysts say stomach-churning volatility in the equity markets are due in great part to the eurozone's sovereign debt soap opera, which has prompted a stampede out of stocks to the safety and steady returns of bonds and money markets.
Stock-fund outflows are more than double what they were last year, at $84 billion through the end of October, according to the Investment Company Institute, an industry research firm funded by mutual fund companies.
Morningstar fund analyst Kevin McDevitt says November's fund flows show that trend continuing, which resulted in redemptions from U.S. and international stock funds, with the money going into taxable bond funds, municipal bond funds, and money market funds, despite historically low yields.
U.S.-stock funds saw $12.5 billion in outflows in November, according to Morningstar, while international-stock funds fared even worse in relative terms with $4.3 billion in outflows, the asset class' worst showing since May, 2010. Indicative of investors' fear, money market funds collected $46 billion in new money in November, "one of their greatest hauls in three years," the firm said.
"It looks like some investors are just selling out and waiting for the New Year to see how the land lies," said EPFR Global Research Director Cameron Brandt in reporting negative equity fund flows for the week ending Dec. 12. "All of the major country and regional equity fund groups, and most of the sub groups, experienced outflows this week."
But investors should be looking at some of the funds listed below. They're providing reliable long-term, double-digit returns as a result of dividend yields as good as or better than those offered by bond and money market funds, as well as the share-price appreciation of their stock holdings.
Long-term investors ought to note that several have 15-year average annual returns of 8% -- and one rang the bell at 12%.
The funds' investors are still in the market and poised to benefit from the quick upside gains that are likely to come when the European miasma gets untangled and investors return to equities.
Separately, Morningstar unveiled its candidates for domestic-stock fund manager of the year. They are Robert Goldfarb and David Poppe, Bill Nygren,Donald and Stephen Yacktman, Scott Satterwhite and James Kieffer, and Pat English and Andy Ramer.
So here, then, are 10 U.S. stock mutual funds with at least $1 billion in assets that have been leaders in their fund category this year:
up 14%, putting it in the top 6% of utility funds; three-year annualized return of 12.5%; 15-year average annual return of 8.2%.
It is described as "an oasis of calm amid market turmoil" and "old school" by Morningstar, because managers John Kohli and Blair Schmicker focus almost entirely on regulated domestic electric and natural gas utilities company stocks, while other utility funds chase telecommunications and energy companies which may boost returns but add to volatility.
Franklin Utilities benefited from investors' hunt for dividend yields, as utilities stocks tend to pay healthy dividends.
, its largest holding at 4.7% of the fund, up 21%;
, second largest at 4%, up 14.6%;
American Electric Power
, 3.8% of fund, up 14.8%.
Fidelity Select Biotechnology
up 12.7%; three-year annualized return of 14%; 15-year average annual return of 8.6%.
Manager Rajiv Kaul emphasizes a mix of mid- and small-cap biotech stocks, which make up about 60% of the fund. There is risk and volatility as some companies often have few or no marketable drugs and government policy changes can affect the health-care sector dramatically.
, up 64%;
, up 58%;
, up 487%.
is the largest holding, at 16%.
up 10.7%, putting it in the top 1% of large-blend funds; three-year annualized return of 16.6%; 15-year average annual return of 9%.
Co-managers Robert Goldfarb and David Poppe run a 34-stock portfolio and "stick to companies with strong balance sheets and franchises," Morningstar said.
The managers avoided the disasters in the financial sector, as the fund now has only 3% of assets in those stocks, which, in and of itself, has helped returns versus its peers.
, the fund's largest holding at 10%, up 62%;
, up 42%;
, up 37%.
, down 5.7%.
Federated Strategic Value Dividend Fund
up 10.6%; three-year average annual return of 12%.
This large value fund pursues income and long-term capital appreciation by investing in high-yielding stocks of undervalued companies positioned to increase their dividends over time.
, the largest holding at 3.9% of the fund, up 12.4%;
, 3.7% of the fund, up 32%;
, up 15%.
Delaware Smid Cap Growth
("smid" for small- and mid-cap)
up 10.3%; three-year annualized return of 29%, placing it in the top 1% of its category. It has a 15-year average annual return of 8%.
Christopher Bonavico and Kenneth Broad, co-managers since the start of 2010, take a long-term view to investing in quality growth stocks trading at a discount to intrinsic value.
Weight Watchers International
, the largest holding at 5.7%, up 56%;
, the second-largest holding at 5.2%, up 54%;
( PEET), 4% of fund, up 45%.
up 10%; three-year annualized return of 12.5%.
This fund invests only in companies with below-average debt and above-average profitability and earnings stability.
Its managers, including William Joyce, are bottom-up stock-pickers. As a result, the portfolio is currently made up of large-cap companies in the consumer staples, health-care and technology sectors, with no significant exposure to financials.
The fund is aimed at institutional investors, as the smallest initial investment in the various share classes is $10 million.
, at 5.8% of the fund, down 5%;
Johnson & Johnson
, 5.7% of fund, up 6%;
, up 33%.
Wells Fargo Advantage Growth
5.6%, putting it in the top 1% in its large-growth category, with a three-year average annual return of 27%; 15-year average annual return of 9.2%.
Tom Ognar took over the fund in May 2002 and, since then through the third quarter, it had an 8% annualized return versus the 2.7% average for its peers.
Ognar has wandered from the fund's mandate -- he has more than twice as many mid-caps and small-caps than others in its category, said Morningstar, which adds that "its ideal holding exhibits sustainable growth prospects, a record of solid financial health, trustworthy management, and a stock price that trades at a significant discount to the team's price target."
, 6.7% of fund, up 20.5%;
Whole Foods Market
( WFMI), 2.8% of fund, up 34%;
Kansas City Southern
, 2.5% of fund, up 34%.
Vanguard Health Care Admiral Fund
up 6.9%, placing it in the top 8% of its fund category; three-year average annual return of 13.5%; 15-year average annual return of 12%.
Vanguard Health Care Admiral is the largest health-care-focused fund, with assets exceeding most of the others in the category combined. It holds stakes in all the largest drug and health-care firms, and the average market cap of the stocks it buys is $27 billion, more than twice the health-care category norm.
Managers Ed Owens and Jean Hynes are value-conscious investors, says Morningstar, and "they spread their portfolio broadly across the sector but tilt toward less-expensive, out-of-favor areas."
, 4.3% of fund, up 34%;
, 3.7% of fund, up 17%;
, 2.3% of fund, up 58%.
SunAmerica Focused Dividend
up 6.8%; three-year average annual return of 22.6%, both performances put it in the top 1% of its large value fund category; 10-year average annual return of 5.9%.
Brendan Voege has been manager since September 2006. The fund's mandate is to seek total return, capital appreciation and current income by employing a "buy and hold" strategy with up to 30 high-yielding stocks.
, 4.1% of the fund and the largest holding, up 33%;
, 4%, up 38%;
, 4%, up 13.6%.
Cullen High Dividend Equity
up 6.5%, placing in the top 2% of funds in its large-value category; three-year average annual return of 11%. The fund has a 2.55% dividend yield.
James Cullen has been lead manager since its inception in 2003, joined by John Gould in 2007. The fund seeks long-term capital appreciation and, secondarily, current income. It invests at least 80% of its assets in dividend-paying mid- and large-cap companies.
, 3.2% of fund, up 32%;
, 3% of fund, up 14%;
Royal Dutch Shell
, 3% holding; up 13%.
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