10 Stocks of Top-Performing Mutual Funds in 2012

BOSTON (TheStreet) -- It's been a miserable past few years for actively managed mutual funds as investors have been stampeding out of them to seek low-risk alternatives to stocks, such as bond funds.

But there are a few U.S. equity funds that are earning their keep with returns more than double that of the S&P 500's 6.8% gain this year, which should convince some investors that it's worth keeping a toe in the stock market.

As for the funds, investors have taken more than $172 billion out of actively managed U.S. and international funds over the past 12 months, and U.S stock funds saw their 13th consecutive month of outflows in May, fund tracker Morningstar said Friday.

A good bit of that money could come back into stocks once there is a clear resoultion to Europe's sovereign debt woes, which will give a tremendous boost to the market.

But for now, it appears investors can't stomach the market volatility especially after getting burned in the 2008 market swan dive and the prospects for an economic meltdown in Europe.

Nevertheless, some wily fund managers are more than earning their keep in the current, hostile environment for stocks.

For example, the $7 billion Fairholme ( FAIRX) fund, run by the highly respected Bruce Berkowitz since 2000, is back as a top performer after a tough run last year when it plunged 32%, with an 18.7% return so far in 2012. His "put all your eggs in one basket" approach is not for everyone, but when he's on a winning streak, Berkowitz is hard to beat. This year, his fund is in the top 1% of funds in the large-value fund category in terms of performance.

Berkowitz's risky bet on the property-casualty insurer and financial-services giant American International Group ( AIG) (the fund owns 4.4% of its shares versus 0.3% for the next largest shareholder) a few years ago, is paying off big time with a 30% gain, after a 52% plunge in its share price last year. AIG makes up about 30% of the Fairholme portfolio and is its biggest holding.

And Fairholme has also done well on another decidedly out-of-favor stock, the struggling retailer Sears Holdings ( SHLD). Its shares are up 59% this year despite its recent dismal financial performance and concerns about its survivability in a tough retail environment. The fund owns 13% of Sears's outstanding shares, with the next largest investor at a mere 1%.

SunAmerica Focused Growth ( SSAAX) fund, with $133 million in assets, is up 17% this year to put in the top 1% of its large-growth category peers. Managed by Ron Sachs since 2008, it has the ever-popular iPhone and iPad maker Apple ( AAPL) as its top pick at just over 9% of the fund (Apple is up 41% this year), followed by online auction site eBay ( EBAY), up 32% this year.

But SunAmerica's biggest winner is soda maker Monster Beverage ( MNST), up 62%.

Also on the best-performers list is the $2 billion Touchstone Sands Capital Institutional Growth ( CISGX), which has been run by Frank Sands Jr. for the past seven years. It's up 12.4% this year, putting it in the top 2% of the large-growth fund category. It has benefited from its 8.7% Apple stake, but also from investments in biopharmaceutical firms.

They include Regeneron Pharmaceuticals ( REGN), which is up 102% this year and makes up 3.3% of the portfolio, and Alexion Pharmaceuticals ( ALXN), up 30% this year, at 4% of the portfolio.

The $118 million Matthew 25 ( MXXVX) fund, run by Mark Mulholland for almost 16 years, is up 14.6% this year, also putting in the top 1% of the large-growth category of funds. It, too, has Apple as its top pick, but among its other big winners are the sporting goods retailer Cabela's ( CAB), up 32% this year and the fund's third-largest holding at 7% of the portfolio.

Matthew 25 also has gotten a boost from another outdoor enthusiasts' products maker, snowmobile and all-terrain vehicle manufacturer Polaris Industries ( Pii), which has gained 24% this year.

Also leading the league is the $224 million, small-cap growth fund Hennessey Cornerstone Growth ( HFCGX) run by Neil Hennessey since 2000. It's up 15.2% this year, putting it among the top 1% of performers among its peers thanks to the success of its stake in the specialty chemicals maker American Vanguard Corp. ( AVD) and yet another snowmobile manufacturer, Arctic Cat ( ACAT).

Here are 10 stocks held by five top-performing actively managed stock mutual funds, in inverse order of share-price return this year:

10. Polaris Industries ( PII)

Company profile: Polaris, with a market value of $4.8 billion, designs and manufactures off-road vehicles, including all-terrain vehicles and side-by-side vehicles for recreational and utility use, snowmobiles, and on-road vehicles, including motorcycles and low-emission vehicles.

Dividend Yield: 2.16%

Investor takeaway: Its shares are up 24% this year and have a three-year, average annual return of 65%. Analysts give its shares seven "buy" ratings, three "buy/holds," and three "holds," according to a survey of analysts by S&P.

9. Alexion Pharmaceuticals ( ALXN)

Company profile: Alexion, with a market value of $18 billion, specializes in the development and marketing of drugs for life-threatening medical conditions, including autoimmune disorders, inflammation and cancer.

Investor takeaway: Its shares are up 30% this year and have a three-year, average annual return of 68%. Analysts give its shares 12 "buy" ratings, five "buy/holds," three "holds," and one "sell," according to a survey of analysts by S&P.

S&P has it rated "hold," on valuation concerns. Analysts estimate it will earn $1.77 per share this year and that earnings will grow by 42% to $2.51 per share next year.

8. Cabela's ( CAB)

Company profile: Cabela's, with a market value of $2.4 billion, is the world's largest retailer of outdoor sporting goods with a focus on fishing and camping.

Investor takeaway: Its shares are up 32% this year and have a three-year, average annual return of 41%. Analysts give its shares four "buy" ratings, three "buy/holds," and five "holds," according to a survey of analysts by S&P.

Analysts estimate it will earn $2.56 per share this year and that that will grow to $2.95 in 2013.

7. eBay ( EBAY)

Company profile: eBay, with a market value of $52 billion, is an online auction site that provides a platform and services that help individuals and merchants conduct online and mobile commerce. It also handles payments via its PayPal unit.

Investor takeaway: Its shares are up 32% this year and have a three-year, average annual return of 31%. Analysts give its shares 12 "buy" ratings, eight "buy/holds," and 14 "holds," according to a survey of analysts by S&P. S&P projects revenue growth of 13% this year and 19% in 2013. Morningstar notes that it held $5.9 billion in cash as of March, which can be used for "platform enhancements, new payment technologies, complementary acquisitions, and share repurchases."

6. American International Group ( AIG)

Company profile: AIG, with a market value of $56 billion, is one of the largest insurance and financial-services firms in the world, even after disposing of its Asian subsidiaries. It operates through a wide range of units that provide general insurance, life insurance, and other financial services. AIG needed a government bailout to survive the nation's financial crisis after decades of high-risk taking investments and the government started selling its shares in 2011, though still has a stake. On May 7, the U.S. Treasury said it plans to reduce its stake to about 61% by selling shares with the goal of eventually being cashed out.

Investor takeaway: Its shares are up 34% this year and have a three-year, average annual return of 4.8%. Analysts give its shares eight "buy" ratings, three "buy/holds," and eight "holds," according to a survey of analysts by S&P.

S&P has it rated "buy" and says it "views the shares as undervalued versuspeers and historical averages, particularly on a price-to-book basis" but cautions that a high degree of risk remains in its turnaround.

5. Arctic Cat ( ACAT)

Company profile: Arctic Cat, with a market value of $467 million, designs, engineers, manufactures, and markets snowmobiles and all-terrain vehicles (ATVs) under the Arctic Cat brand name.

Investor takeaway: Its shares are up 42% this year and have a three-year, average annual return of 100%. Analysts give its shares two "buy" ratings, two "buy/holds," and two "holds," according to a survey of analysts by S&P. Analysts estimate it will earn $2.73 per share this fiscal year and rise 24% to $3.38 next year.

4. Sears Holdings ( SHLD)

Company profile: Sears Holdings, with a market value of $5.6 billion, is the parent company of Sears, Sears Canada and Kmart stores. It is the fourth-largest broadline retailer in the U.S.

Investor takeaway: Its shares are up 59% this year but have a three-year, average annual decline of 9.8%. Analysts give its shares two "hold," ratings, three "weak holds," and one "sell," according to a survey of analysts by S&P. Analysts estimate it will lose $2.66 in its fiscal 2013 and lose $2.57 in the following year. It is in the process of downsizing and refocusing its efforts, with plans to close over 173 underperforming stores this year.

3. Monster Beverage ( MNST)

Company profile: Monster, with a market value of $13 billion, develops, markets, and sells a variety of nonalcoholic beverages, including energy drinks, natural sodas, and fruit juices. Its Monster Energy Drink is the second-largest selling energy drink in the U.S.

Investor takeaway: Its shares are up 62% this year and have a three-year, average annual return of 69%. Analysts give its shares four "buy" ratings, two "buy/holds," four "holds," and one "weak hold," according to a survey of analysts by S&P. Analysts estimate it will earn $2.04 per share this year and $2.51 next year.

2. American Vanguard Corp. ( AVD)

Company profile: American Vanguard, with a market value of $736 million, is a specialty chemical manufacturer with a focus on the agricultural and commercial markets.

Investor takeaway: Its shares are up 92% this year and have a three-year, average annual return of 34%. Analysts give its shares one "buy" rating, one "buy/hold," and one "hold," according to a survey of analysts by S&P.

Analysts estimate it will earn $1.06 per share this year and that earnings will grow by 25% to $1.32 next year.

1. Regeneron Pharmaceuticals ( REGN)

Company profile: Regeneron, with a market value of $11 billion, is a biotech firm that develops, and commercializes drugs that fight inflammation, cancer, and eye disease.

Investor takeaway: Its shares are up 102% this year and have a three-year, average annual return of 90%. Analysts give its shares seven "buy" ratings, two "buy/holds," and seven "holds," according to a survey of analysts by S&P.

Analysts estimate it will earn $1.25 per share this year and that earnings will grow 105% to $2.56 in 2013.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

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