10 Stocks That Boosted First-Quarter Mutual Fund Returns (Update1)

(Story updated to add that Bank of America CEO got $7 million in compensation for 2011.)

BOSTON ( TheStreet) -- With risk-on trading since the beginning of this year, an environment in which stock-pickers should shine, the first-quarter returns for actively managed U.S. mutual funds was only mediocre.

They rose an average of 12.8%, compared with the S&P 500's 12.2% gain. So it's easy to see why investors continue to move into passively managed funds such as index or exchange traded funds.

And only 20 actively managed domestic funds with assets over $2 billion had returns of better than 18% in the quarter, according to a screen of Morningstar's mutual fund database.

Those increases likely indicate that experienced money managers at the big funds are remaining cautious and sticking with well-known large-cap stocks, because the faster-moving, small-cap stock Nasdaq Composite Index ended the first quarter up 19%.

Most of the top-performing funds rode technology and financial stocks for gains last quarter. Those sectors advanced 19.7% and 19.3%, respectively.

Of course, some fund managers earned their keep much better than others.

Certainly, Bruce Berkowitz, manager of the $8 billion Fairholme Fund ( FAIRX) is one, because, after losing 32% in 2011, his fund is up 29% this year.

And he showed some real chutzpah. Berkowitz was helped by troubled retailer Sears ( SHLD), which is up 120% this year (and is 10.7% of the portfolio), and equally out-of-favor Bank of America ( BAC), up 72% this year and the best performer in the Dow Jones Industrial Average. Bank of America tumbled 58% last year.

The next-best performer to Fairholme among the big funds was the $2.5 billion Touchstone Sands Capital Select Growth Fund ( CFSIX), with a gain of 23.9%, achieved with the help of technology stocks, which make up 33% of the fund. It benefited, in particular, from what appears to be everybody's favorite pick, iPhone and iPad maker Apple ( AAPL), which makes up 7.5% of the diversified fund.

The $4 billion Columbia Seligman Communications & Information Fund ( SCMIX) is true to its name, as its portfolio is 92% technology stocks, which helped it to a 22.5% gain in the first quarter. One of its biggest winners was chip maker Advanced Micro Devices ( AMD).

Continuing with the technology theme, the $3.2 billion T. Rowe Price Science & Technology Fund ( PRSCX), up 21.7% this year, is benefiting from the growth of computer-aided design software maker Autodesk ( ADSK). The $4 billion Putnam Voyager ( PVYYX) has advanced 21%, thanks, in part, to the 34% rise of chip maker Micron Technology ( MU).

The $42 billion Fidelity Growth Company Fund ( FGRFX) is also up 21% this year, and achieved that with some real home-run picks in drugmaker Regeneron Pharmaceuticals ( REGN), up 106% this year, and clothing accessories retailer Fossil ( FOSL), up 68%.

Here are 10 stocks that have been among the biggest contributors to the performance of the top-performing large mutual funds this year, in inverse order of their returns:

10. Microsoft ( MSFT)

Company profile: Microsoft, with a market value of $273 billion, develops the Windows PC operating system, the Office suite of productivity software, and enterprise server products such as Windows Server and SQL Server. It also owns the Xbox 360 video game console, Bing Internet search, business software, and software for mobile devices.

Investor takeaway: Its shares are up 25% this year and have a three-year, average annual return of 23%. Analysts give its shares 14 "buy" ratings, eight "buy/holds," 13 "holds," and one "sell," according to a survey of analysts by S&P. S&P has it rated "buy," with a $33 price target, only a slight premium to the current price and says the rating is "based mostly on valuation.

The shares are trading at 9.4 times our fiscal year 2013 earnings per share estimate, a significant discount to the market and peers." It adds that "the eventual launch of Windows 8, could finally help (the company) penetrate the mobile device category." For fiscal year 2012, analysts estimate it will earn $2.69 per share, and will be $3.01 in 2013, or 12% growth.

9. Micron Technology ( MU)

Company profile: Micron, with a market value of $8 billion, is a manufacturer of memory chips that are essentially commodity products for computers.

Investor takeaway: Its shares are up 34% this year and have a three-year, average annual return of 26%. Analysts give its shares 13 "buy" ratings, eight "buy/holds," and six "holds," according to a survey of analysts by S&P. S&P has it rated "hold," on weak demand. It's expected to lose 33 cents per share this year, but earn 65 cents per share in 2013.

8. EMC Corp. ( EMC)

Company profile: EMC, with a market value of $62 billion, is a leading provider of hardware, software, and services for enterprise network storage, and now, through its VMware unit, software and services. The company is well-positioned to become a major player in cloud computing and virtualization software.

Investor takeaway: Its shares are up 37% this year and have a three-year, average annual return of 37%. Analysts give its shares 21 "buy" ratings, 11 "buy/holds," and five "holds," according to a survey of analysts by S&P. S&P, which has it rated "strong buy," and says there are several reasons for that including that the company is taking market share from smaller competitors, demand for data storage is growing and because there is growing interest in cloud computing and virtualization software, which have become EMC specialties.

7. Autodesk ( ADSK)

Company profile: Autodesk, with a market value of $9.6 billion, is the computer-aided design (CAD) industry's unquestioned leader as manufacturing, infrastructure, building, and media and entertainment firms use its software to manage projects.

Investor takeaway: Its shares are up 39% this year and have a three-year, average annual return of 38%. Analysts give its shares nine "buy" ratings, three "buy/holds," 10 "holds," and one "weak hold," according to a survey of analysts by S&P. For fiscal 2013, analysts estimate it will earn $2.03 per share and that will grow by 19% in 2013 to $2.41.

6. Apple ( AAPL)

Company profile: Apple, with a market value of $561 billion, designs consumer electronic devices, including PCs (Mac), tablets (iPad), phones (iPhone), and portable music players (iPod). Its iTunes online store is the largest music distributor in the world. In its most recent fiscal quarter, reported Jan. 25, unit sales of iPhones were up 128% from a year earlier, iPads rose 111%, Macs increased 26%, while iPods declined 21%.

Investor takeaway: Its shares are up 50% this year and have a three-year, average annual return of 79%. According to S&P, $10,000 invested five years ago would be worth $63,735 today.

Apple only got sweeter for investors in March as the company announced that starting in September it will pay a $2.65 per share quarterly dividend, which means a 1.7% yield, and will initiate a $10 billion stock buyback program to be conducted over three years. Analysts give its shares 35 "buy" ratings, 12 "buy/holds," five "holds," and one "sell," according to a survey of analysts by S&P. Analysts estimate it will earn $43.63 per share this year and that earnings will grow 13%, to $49.13 per share in 2013.

5. Advanced Micro Devices ( AMD)

Company profile: Advanced Micro, with a market value of $5.6 billion, makes microprocessors for the computer, communications, and consumer electronics industries.

Investor takeaway: Its shares are up 50% this year and have a three-year, average annual return of 34%. Analysts give its shares 11 "buy" ratings, two "buy/holds," 15 "holds," four "weak holds," and two "sells," according to a survey of analysts by S&P. S&P has it rated "hold," on valuation concerns.

4. Fossil ( FOSL)

Company profile: Fossil, with a market value of $8 billion, makes wristwatches under the Fossil, Relic and Zodiac brand names, along with a complementary line of leather goods, sunglasses and jewelry. Its products are sold in department and specialty retail stores.

Investor takeaway: Its shares are up 68% this year and have a three-year, average annual return of 100%. Analysts give its shares four "buy" ratings, five "buy/holds," and six "holds," according to a survey of analysts by S&P. It's expected to earn $5.51 per share this year and rise by 21% to $6.64 per share in 2013.

3. Bank of America ( BAC)

Company profile: Bank of America, with a market value of $102 billion, is one of the largest financial institutions in the world, with lending operations in the consumer, small business, and corporate arenas as well as asset management and investment banking divisions. It posted net income of $85 million, or 1 cent per share, for 2011, in line with analysts' expectations. Bank of America has assets of $2.1 trillion.

Investor takeaway: Its shares are up 72% this year and have a three-year, average annual return of 9.5%. Analysts give its shares four "buy" ratings, four "buy/holds," 21 "holds," and one "weak hold," according to a survey of analysts by S&P. For fiscal year 2012, analysts estimate that the company will earn 70 cents per share, and will grow by 57% to $1.10 per share in 2013.

Bank of America CEO Brian Moynihan received $7 million in compensation for 2011, which is 30% less than what he earned in 2010, as the company's stock slumped, according to a company regulatory filing last week. His salary was unchanged at $950,000, with the rest of his package consisting of stock-price related performance incentives.

2. Regeneron Pharmaceuticals ( REGN)

Company profile: Regeneron, with a market value of $11 billion, develops drugs that fight inflammation, cancer, and eye disease. Last year, it won FDA approval and launched EYLEA for the treatment of wet age-related macular degeneration.

Investor takeaway: Its shares are up 106% this year and have a three-year, average annual return of 100%. Analysts give its shares eight "buy" ratings, one "buy/hold," and seven "holds," according to a survey of analysts by S&P. Earnings are expected to swing from a loss of 48 cents per share this year to $1.69 in 2013.

1. Sears ( SHLD)

Company profile: Sears Holdings, with a market value of $7 billion, is parent to Sears, Sears Canada and Kmart stores (which it bought in 2005) and is the fourth-largest broad lines retailer in the U.S. with about 4,000 stores. It is downsizing by closing stores, selling some of its real estate assets, and most recently is reported to be trying to sell its Land's End clothing brand.

Investor takeaway: Its shares are up 120% this year and have a three-year, average annual return of 12.7%. Analysts give its shares one "buy" rating, two "holds," three "weak holds," and one "sell," according to a survey of analysts by S&P. Analysts estimate it will lose $4.87 per share this year and lose $4.69 per share in 2013.

It's losing market share to competitors on many fronts, from tools and hardware to clothing and appliances, although its brand names continue to have appeal. The company is controlled by ESL Investments, a hedge fund run by Edward Lampert, as it owns about 60% of the company, while Fairholme Capital, parent of the Fairholme fund, owns 15.6%. One lingering question for potential investors is whether Lampert will attempt a leveraged buyout.

>>To see these stocks in action, visit the 10 Stocks That Boosted First-Quarter Mutual Fund Returns portfolio on Stockpickr.
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