Forester, Hussman Defy Market Meltdown

The highly rated mutual funds' defensive stock picks keep them afloat while rivals sink.
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The

Dow Jones Industrial Average

, having plunged 1,400 points over eight trading days, jumped 936 points on Monday, the best single-day gain in a quarter century. The rally, which stalled on Tuesday, was spurred by a globally coordinated sovereign recapitalization of the world's largest banks.

For investors who believe that Friday was the bottom of the market, here are the 10 best-rated open-end stock mutual funds based on risk-adjusted performance for the 12 months through Sept. 30. Each of the funds holds at least 50% of its assets in equities and is rated A+.

The most highly rated stock fund at the end of the third quarter was the

Forester Value Fund

(FVALX) - Get Report

. With a sector allocation of 19% pharmaceuticals, 11.6% food, 8.5% oil and gas, 5.9% insurance, 5.4% retail and 5.3% beverages, its portfolio is in a defensive position for this rough economy.

Forester Value's largest holdings include

HJ Heinz

(HNZ)

,

Kraft Foods

(KFT)

,

Johnson & Johnson

(JNJ) - Get Report

and

General Dynamics

(GD) - Get Report

. The fund also has a small stake in

Anheuser-Busch

(BUD) - Get Report

whose

acquisition by InBev

has a higher probability of success now that some banks funding the deal are receiving direct injections of new equity from world governments.

The second-best rated open-end stock fund is

The Arbitrage Fund

(ARBFX) - Get Report

, which attempts to find special situations including mergers, takeovers, buyouts or other liquidations that may present an opportunity. Some of the largest positions include

Waste Industries USA

(WWIN)

,

BEA Systems

(BEAS)

,

Huntsman

(HUN) - Get Report

and

Trane

(TT)

.

In third place, the

Hussman Strategic Growth Fund

(HSGFX) - Get Report

rose 4.2% for the year ending Sept. 30 on investments in Johnson & Johnson,

Amazon.com

(AMZN) - Get Report

,

Colgate-Palmolive

(CL) - Get Report

and

Coca-Cola

(KO) - Get Report

.

For an explanation of our ratings,

click here

.

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.