Best, Worst Funds During October's Big Rally

BOSTON ( TheStreet) -- For investors, it was the worst of times followed by the best of times. September's slide set the groundwork for October's stock-market rally, the biggest in almost four decades.

October is bestowing a blessing on mutual fund managers, as battered and beleaguered a group as you will find in the investment industry. A sustainable rally could lure individual investors back to equity funds after they stampeded out of them, frustrated by outsized volatility and gloomy forecasts for global economies.

The S&P 500 Index, the benchmark for U.S. stocks, is up 13.5% for the month through Thursday, its best performance since a 16.3% gain in October 1974.

The rally has helped the benchmark index move into positive territory -- it was up 3.8% through Oct. 27 -- for the first time since Aug. 3. And that bellwether event may be the catalyst that will get investors back into the market and mutual funds.

Much of the recent gains came last week after euro-zone leaders hammered out an agreement to avoid sovereign debt defaults, and that helped allay recession fears at home, this while U.S. companies continue to report solid third-quarter results.

The 15,561 mutual funds tracked by Morningstar, including international and domestic stock, bond, balanced and alternative funds, returned an average of 6% in the 30 days through Oct. 27. Domestic equity funds rose an average of 10%.

The big winners among domestic stock funds, with total returns in the teens to low 20s, in terms of percentage, were oil- and gas-sector funds and small-cap stock funds. The $14 million ProFunds Oil Equipment Services and Distribution Ultrasector Fund ( OEPIX) led the way with a 28.7% return, followed by a half-dozen highly leveraged funds, which similarly focus on daily returns and therefore are highly volatile.

Actively managed buy-and-hold funds were further behind, but still recorded gains as high as 20%. One of the top performers is the Integrity Williston Basin/Mid-America Fund ( ICPAX). The $322 million mutual fund has a 30-day return of 20%, including a 10% gain in the past week, but it is up only 8% this year.

The fund is a sniper shot on the booming oil-shale industry. It's benefitting from a rise in crude oil prices on prospects of an economic recovery. The top-performing holdings are all oil-field exploration and oil-field services companies, including: Brigham Exploration ( BEXP), up 35% this month; National Oil Well Varco ( NOV), up 31.6%; and Carbo Ceramics ( CRR), up 10.3%.

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Pacific Advisors Small Cap Value Fund ( PASMX), with $73 million in assets, has a 19.8% gain in the past month, getting a boost from Kirby ( KEX), which operates the largest fleet of tank barges in the U.S. inland waterways, up 14.4% this month; Conn's ( CONN), a home-appliance retailer operating over 50 stores in Texas and Louisiana, up 17.8% this month; and Amerigon ( ARGN), a maker of high-technology electronic systems for auto and truck manufacturers, up 16.6%.

Another in the same category of funds is the $55 million Dreyfus Small Cap Fund ( DSVAX), with a 19.6% return in the past 30 days, although it's off 9.4% this year.

Dreyfus Small Cap has benefited from the recent gains of ScanSource ( SCSC), a distributor of automatic-identification and point-of-sale products, including bar-code printers and scanners, which is up 25% in the past month; DealerTrack Holdings ( TRAK), a provider of on-demand software and data services for the car-retail industry, which gained 30% this month; and GeoEye ( GEOY), a provider of satellite imagery and image-processing services and products, which gained 29%.

BlackRock Energy & Resources Fund ( SSGRX) is the biggest among the top-performing funds over the past month. It has $1.1 billion in assets and a 19% advance, but it's down 6.9% on the year. This fund has an amazing 10-year annualized return of 18%, versus 3.5% for the S&P 500.

Its big winner of late is Alpha Natural Resources ( ANR), the biggest holding at 9%, a stake almost double the size of the second-largest holding. Although it's down 58% this year, the stock gained 17.5% in the past 30 days, including 19.6% in the past week.

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The second-largest fund holding is another coal miner, Consol Energy ( CNX), up 18.4% this month.

Fidelity Select Energy Fund ( FSENX), with $1.9 billion in assets, is up 17.4% in the past 30 days, mostly on the back of big oil. Its largest holding, at 11.8% of the fund, is Chevron ( CVX), which is up 16.8%, while its second-biggest holding, at 11.3%, Exxon Mobil ( XOM), has gained 12.3%. The No. 3 position, oil-services provider Schlumberger ( SLB), gained 17.5%.

On the flip side, the worst performers over the past 30 days are a mixed bag, with a smattering of health-care funds that stand out.

The biggest laggard, with a 9.6% loss over the past month, is the $5 million Ram Small/Mid-Cap Fund ( SMBOX). It's down 11.3% this year.

The fund's worst performers include its two largest stock holdings, and both are pawnshop operators: EZCorp. ( EZPW), down 7.4%, and First Cash Financial Services ( FCFS), which has lost 4.7% this month.

Fidelity Select Medical Equipment and Systems ( FSMEX), a $1.3 billion fund, with a 0.77% gain in the past 30 days, is the largest fund among the 10 worst performers. It's little changed this year.

Its largest holding, at 15.7% of the fund, is drug-therapies developer Baxter International ( BAX), which is down 1% this month, while medical-device maker Boston Scientific ( BSX), its third-biggest holding at 6.3%, lost 7.9%. Another top holding, Edwards Lifesciences ( EW), is down 3.4%.

The second-worst performance in the past month was by the $27.4 million Huntington New Economy Fund ( HNEAX), which lost 4.1% of its value.

Among its poorest performers was its third-largest holding at 3.6%, Green Mountain Coffee Roasters ( GMCR), which is down 37.7% in the past month, and its second-biggest holding, also at 3.6%, Westport Innovations ( WPT), a maker of natural-gas engines, which fell 5.7%.
Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.