The best-performing equity mutual funds in January were contrarian funds betting against major stock-market indexes.
With Japan's Nikkei-225 index having fallen 9.8% by Jan. 31 from the end of December, the
ProFunds UltraShort Japan Fund
beat all other open-end stock mutual funds, returning an extraordinary 31.2%. The fund tracks the daily inverse returns of the Nikkei-225 index with 200% leverage. Index members whose declines bolstered this fund include
, down 28.7%;
, minus 23.9%; and
, down 20.6%.
Closer to home are three inverse funds with "buy" ratings making our list by shorting stocks both small and large.
Smaller U.S. stocks, as measured by the 11.1% decline in the Russell 2000 Index, gave more ground than the 8.7% decline in the
Dow Jones Industrial Average
Returning 18.1% for the month, the
ProFunds Ultra Short Small-Cap ProFund
lived up to its "buy" rating of B. This 200% leveraged inverse fund ascends as members of the Russell 2000 descend. Small-cap decliners providing some of the largest contributions were
Hayes Lemmerz International
, crashing 80.0%;
, falling 61.8%;
, dropping 56.3%; and
, down 55.3%.
The two "buy"-rated funds leveraged 200% to the opposite performance of the Dow Jones Industrial Average are the
Rydex Inverse Dow 2x Strategy Fund
, at A; and the
ProFunds Ultra Short Dow 30 ProFund
Dow Industrial damage was led by a 53.3% decline from
Bank of America
, a drop of 47% from
, minus 30.8% from
, a decline of 30.2% from
and a drop of 25.1% from
The broader S&P 500 Index shed 8.4% for the month, and the 250% leveraged inverse fund,
Direxion S&P 500 Bear 2.5X Fund
, jumped 18.1%. No index members lost more than the 71.1% decline of
Fifth Third Bancorp
, minus 62.4% in
Huntington Bancshares OH
, minus 58.5% in
, minus 58.1% in
Marshall & Ilsley
and minus 56.5% in
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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.