BOSTON ( TheStreet) -- The S&P 500 Index's decline of 4.1% in the past month has erased much of the year's early gains, resulting in a slim 2% upside through Friday, as analysts project slower corporate earnings growth and a slew of international uncertainties from Europe to Asia puts investors in defensive mode.But that would be overlooking industries that have benefited from a shift out of riskier investments. The best U.S. investment managers are outperforming stock-market indices mainly by owning a mix of consumer, health-care and utilities stocks, along with select shares in technology and energy that are bucking trends. The Vanguard Wellesley Income Fund ( VWINX), the Sequoia Fund ( SEQUX) and the Yacktman Fund ( YACKX) are three large and well-known mutual funds that are on track to produce gains for this year.
The aptly named Vice Fund ( VICEX) is proof of that. Although it is down 2.6% this month, it is up 10.4% this year which puts it in the top 1% of top-performing funds of the 1,970 funds in the large-blend stock fund category for that period. It also has a five-year average annualized return of 3.3%. The fund's 30-stock portfolio is 57% consumer-defensive stocks, compared to 12% for its category average. The next-largest allocation is to industrials, at 25% of the fund, about double its category average, and consumer cyclical, a 14% weighting, versus the 8% average of other funds in its category. The Vice Fund's top-five picks are: cigarette makers Philip Morris International ( PM) at 12.7% of the fund; Lorillard ( LO), 10%; Altria ( MO), 6%; and adult-beverage makers Carlsberg ( AS), at 6.3%, and Diageo ( DEO), 4.1%. The industrial weighting includes a handful of defense-industry stocks, including: Northrop Grumman ( NOC), General Dynamics ( GD) and Raytheon ( RTN). For those with no moral qualms about what they invest in, booze and butts do well in any investing environment.
The Sequoia Fund ( SEQUX), a large-cap blend fund, has been an able performer for a long time, sporting an amazing 9.7% average annual return over the past 15 years. Its heaviest weighting now is in the health-care sector, at 27% of the fund, versus the 11% of its large-blend fund category peers, followed by a 23% consumer-cyclical weighting, compared to the average 8.4% weighting of its peers. The fund has lost 3% over the past month, but is up 3% over the past three months and 7.9% this year. The $4.3 billion fund holds only 31 stocks and has relatively low 23% annual turnover. The top holdings are: drug maker Valeant Pharmaceuticals ( VRX), 13.7%; Warren Buffett's conglomerate Berkshire Hathaway ( BRK.A), 9.3%; discount-clothing retailer TJX Cos. ( TJX), 6%; construction-products maker Fastenal ( FAST), 5.5%; and Idexx Laboratories ( IDXX), a veterinary diagnostic laboratory business, at 4.8%.
The Vanguard Consumer Staples ETF ( VDC) is one quick way to get a play on the defensive consumer-staples sector. The exchange traded fund is down 2.6% over the past month, but up 9% over three months and 7.9% this year. With $715 million in assets, it holds 108 stocks and has a miniscule 7% annual portfolio turnover. The top holdings are: household-products maker Procter & Gamble ( PG), at 12.4%; Coca-Cola ( KO), 9.8%; cigarette maker Philip Morris ( PM), 8.3%; retail chain Wal-Mart ( WMT), 7.2%; beverage and snack maker Pepsi ( PEP), 7%; packaged-foods company Kraft Foods ( KFT), 4.2%; and cigarette maker Altria, 4.1%.
Fidelity Select Consumer Staples ( FDFAX) has an admirable long-term record, ranking in the top 1% of consumer-staples-focused funds over the five-, 10- and 15-year periods. It has an average annual return of 10% over five years and 8.8% over 10 years. During the past month, it lost 2.5%, but it is up 9.6% over three months, and 5.7% this year. The $1.6 billion fund holds 62 stocks and has an annual turnover of 57%. Its top holdings include: household-products maker Procter & Gamble ( PG), at 16% of the fund; Coca-Cola ( KO), 12.4%; international cigarette maker British American Tobacco ( BTI), 7%; pharmacy retailer CVS Caremark ( CVS), 7%; cigarette maker Altria ( MO), 5.5%; and personal-products maker Colgate-Palmolive ( CL), 4%.