Given the suddenness and depth of turbulence that has jarred the stock market, it is difficult to predict a rebound. But following periods of turmoil, new and unexpected sectors often pop up to lead an incipient recovery.
One clue is to look at industries that exhibited strength just prior to the carnage.
The accompanying table shows some interesting hints of groupings that might light the way when the market finally turns around. Whereas "large cap" and "international" had been the mantra of market pundits in recent years, groups representing the antithesis of those trends showed surprising strength before the recent implosion.
The long-overlooked small-cap group led stock mutual fund investment objectives in August, with an average gain of 2.5%, followed by tech/telecoms, with an advance of 1.6%, and underappreciated mid-caps, which rose 1.3%.
Rounding out the top five were the precursors of caution by the market. The equity income division gained 1.1% on average during the month, while the slightly more aggressive growth and income category edged 0.95% higher.
With a rise of 17.6% for the month, the
Harbor SMID Value Fund
drove the small-cap group, although it remains off 14.1% for the year. The top tech/telecom offering was the
T. Rowe Price Developing Technology Fund
, up 6%, but down 5.5% year to date.
With the mid-cap group, the top fund was the
Apex Mid-Cap Growth Fund
, which gained 9.8%. It is also up that much for the year.
CM Advisers Fund
was tops for the equity income group but remains down by 7.1% for the year to date. Its major portfolio holdings include
Also focusing on reasonably stable investments likely to maintain dividends is the top growth and income fund,
Yacktman Focused Fund
, which gained 5.9% in August and remains down only 4.8% for the year's first eight months. In addition to Wal-Mart and Microsoft, its largest holdings include
Procter & Gamble
Richard Widows is a senior financial analyst for TheStreet.com Ratings. Prior to joining TheStreet.com, Widows was senior product manager for quantitative analytics at Thomson Financial. After receiving an M.B.A. from Santa Clara University in California, his career included development of investment information systems at data firms, including the Lipper division of Reuters. His international experience includes assignments in the U.K. and East Asia.