If past performance is any indication of future returns, it's not surprising that investors are skeptical of the mutual fund industry. In the past five years, more than two-thirds of the 5,000-plus funds followed by Morningstar have done worse than the underlying stock and bond indexes they're supposed to beat, or at least track. But some funds are still shining. As part of our annual best-funds list, we identified the top-performing funds across four separate categories: U.S. Stocks, Foreign Stocks, Bonds and Alternatives. Below, a look at the top domestic funds.
Fidelity OTC Portfolio (FOCPX)
- Manager: Gavin Baker
- Assets: $7.1 billion
- Top Holdings: Apple, Google
This fund has plenty of big names, and it measures itself against the broad Nasdaq. It has been helped by owning Apple, but the decision to buy that tech giant was made before the current manager, Gavin Baker, took over in summer 2009. That makes some analysts question whether the fund's future will be as good as its past. The fund is up about 17 percent since Baker took the reins. Fidelity says the record speaks for itself. For his part, Baker says firms that capitalize on the shift toward centralized "cloud" computing will prevail in the current decade. Nearly half the fund's assets are in 10 names, including Qualcomm, Oracle and, yes, Apple. "That can cut both ways," says Jim Lowell, editor of the Fidelity Investor newsletter, but so far it's worked.
Reynolds Blue Chip Growth (RBCGX)
- Manager: Frederick Reynolds
- Assets: $207 million
- Top holdings: Apple, Baidu
Frederick Reynolds runs his investment shop from his house a few blocks from the Las Vegas Strip. Back in late 2007, he sold stocks in earnest after worrying about consumers borrowing against their homes to finance their lifestyles. As a result, Blue Chip Growth lost only 5 percent in 2008, compared with the broader market's 39 percent slide. Today, however, Reynolds is bullish. He recently bought a home in Las Vegas, now America's foreclosure capital, because he says some real estate there is a good value. Stockwise, he prefers firms whose dominant market positions make it tough for competitors to gain ground, such as online retailer Amazon and Chinese Internet-search firm Baidu. Reynolds came to prominence with a string of big years at two other funds in the 1990s. But in the wake of huge losses during the dot-com bust, he shuttered two: Reynolds fund and Reynolds Opportunity fund.
- Manager: Donald Yacktman
- Assets: $6.3 Billion
- Top Holdings: PepsiCo, News Corp.
Austin, Texas, resident Donald Yacktman actually runs two top-performing funds. At first glance, the stocks Yacktman likes seem to have nothing in common. But Jason Subotky, who runs the fund with Yacktman p re and his son Stephen, says there's a pattern: Most holdings are global firms with multiple business lines that generate predictable revenue. The Yacktman fund owns PepsiCo -- about a tenth of its portfolio -- not for its soft drinks but for its snack-chip brands, which include Lay's and Doritos. Yacktman also favors News Corp. -- another 10 percent of the fund -- for its cable channels' share of stable subscription fees (News Corp. owns SmartMoney). In addition to stellar five-year returns, this fund also has beat the market over 10- and 15-year spans.
Intrepid Small Cap (ICMAX)
- Manager: Jayme Wiggins
- Assets: $684 million
- Top holdings: Bio-Rad Laboratories, CSG Systems International
SmartMoney asked Morningstar for a list of the top-performing funds over the past five years from four separate categories: U.S. Stocks, Foreign Stocks, Bonds and Alternatives. From there, we whittled down the list, eliminating funds that charge high annual expenses and have high minimum investments. We also wanted to highlight funds that any investor can get into, so we took out funds that are only available in retirement plans or are closed to new investors.
This fund aims to own firms that have clear, simple business models, predictable cash flows and manageable debt loads. "We want to be able to predict what's normal for a company to earn," says lead portfolio manager Jayme Wiggins, whose portfolio includes billing software company CSG Systems International and medical instrument maker Bio-Rad Laboratories. Wiggins took over the fund's portfolio in 2010 after graduating from Columbia Business School (he ran Intrepid's high yield bond portfolios before grad school). Like his successful predecessor, Eric Cinnamond, Wiggins isn't afraid park money in cash if there's a dearth of undervalued securities. That's precisely what he did last year, putting roughly a fourth of the fund in cash. The tactic has helped of late, but "it's not always going to look good in every market," says Morningstar mutual fund analyst Katie Reichart.
T. Rowe Price Health Sciences (PRHSX)
- Manager: Kris Jenner
- Assets: $3.1 Billion
- Top holding: Alexion Pharmaceuticals
Portfolio manager Kris Jenner's fund has an assortment of mid-sized and large healthcare firms, but he's willing to take some chances on smaller companies whose drugs have lots of potential, such as Incyte Corp. and Pharmasset Inc. But sharp market swings can make trying to pick the right small company a dangerous game. "They have a lot of boom and bust periods. Making it up after a bust is hard," says Jenner, who landed at T. Rowe Price as an associate biotech analyst in 1997 after a career as a physician. To smooth out big swings, the fund mixes the volatile stocks with more-established ones, typically firms that Jenner says enjoy consistent earnings growth. Among his current favorites: McKesson, the drug and medical supply distributor, and insurance company UnitedHealth Group.
|American Century Heritage Investor||TWHIX||-2.3||6.7||101|
|Fidelity OTC Portfolio||FOCPX||7.1||6.3||92|
|Fidelity Select Consumer Staples Portfolio||FDFAX||9.6||7.5||86|
|Fidelity Select Retailing Portfolio||FSRPX||7.9||7.0||93|
|Fidelity Small Cap Discovery||FSCRX||5.3||6.5||104|
|Hancock Horizon Burkenroad||HHBUX||8.4||5.6||140|
|ING Large Cap Growth Portfolio||IEOSX||5.8||6.2||85|
|ING Midcap Opportunities Portfolio||ISMOX||3.9||7.6||104|
|Integrity Viking Williston Basin/Mid-North America Stock||ICPAX||14.9||8.2||150|
|Intrepid Small Cap Investor||ICMAX||5.1||12.6||140|
|Munder Growth Opportunities||MNNAX||-0.9||5.8||199|
|Pin Oak Equity||POGSX||5.0||5.4||125|
|Reynolds Blue Chip Growth||RBCGX||-1.4||11.8||180|
|Saratoga Technology & Communication Portfolio||STPAX||-3.2||9.8||267|
|SouthernSun Small Cap Investor||SSSFX||15.8||7.8||143|
|T. Rowe Price Health Sciences||PRHSX||16.4||7.8||84|
|T. Rowe Price Media & Telecommunications||PRMTX||3.3||7.4||84|
|Transamerica Systematic Small/Mid Cap Value||IIVAX||3.8||5.5||147|
|Wells Fargo Advantage Growth Inestor||SGROX||13.4||9.2||131|