Forester, Hussman Defy Market Meltdown

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



Kraft Foods



Johnson & Johnson

(JNJ) - Get Report


General Dynamics

(GD) - Get Report

. The fund also has a small stake in


(BUD) - Get Report


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



BEA Systems




(HUN) - Get Report





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,

(AMZN) - Get Report



(CL) - Get Report



(KO) - Get Report


For an explanation of our ratings,

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Kevin Baker became the senior financial analyst for TSC Ratings upon the August 2006 acquisition of Weiss Ratings by, 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.