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

(UKPIX) - Get Report

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

Yokogawa Electric

(YOKEF)

, down 28.7%;

Mitsubishi Electric

(MIELY)

, minus 23.9%; and

Yahoo! Japan

(YAHOF)

, 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

in January.

Returning 18.1% for the month, the

ProFunds Ultra Short Small-Cap ProFund

(UCPIX) - Get Report

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

(HAYZ)

, crashing 80.0%;

Colonial BancGroup

(CNB)

, falling 61.8%;

ION Geophysical

(IO) - Get Report

, dropping 56.3%; and

La-Z-Boy

(LZB) - Get Report

, 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

(RYCWX) - Get Report

, at A; and the

ProFunds Ultra Short Dow 30 ProFund

(UWPIX) - Get Report

at A-.

Dow Industrial damage was led by a 53.3% decline from

Bank of America

(BAC) - Get Report

, a drop of 47% from

Citigroup

(C) - Get Report

, minus 30.8% from

Alcoa

(AA) - Get Report

, a decline of 30.2% from

Caterpillar

(CAT) - Get Report

and a drop of 25.1% from

General Electric

(GE) - Get Report

.

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

(DXSSX) - Get Report

, jumped 18.1%. No index members lost more than the 71.1% decline of

Fifth Third Bancorp

(FITB) - Get Report

, minus 62.4% in

Huntington Bancshares OH

(HBAN) - Get Report

, minus 58.5% in

SunTrust Banks

(STI) - Get Report

, minus 58.1% in

Marshall & Ilsley

(MI)

and minus 56.5% in

Regions Financial

(RF) - Get Report

.

For more information, check out an

explanation of our ratings

.

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.