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Commodities Boost These Funds, but for How Long?

Funds with lots of mining exposure are riding high lately after a terrible 2008.

David Kathman, 06/23/2009

As the likelihood of economic Armageddon has diminished and the world financial system has shown signs of stabilizing, markets have rallied hard over the past three months. To a large extent, this has been a low-quality rally, in which many of the biggest gains have been in risky areas that got hammered the hardest last year, such as bank stocks, emerging-market stocks, and high-yield bonds. As we've noted recently, mutual funds with big stakes in these investments have mostly done very well in the current rally, though they still feature terrible one-year records.

Another area that has bounced back strongly in this rally after a terrible 2008 is commodities. Commodity-related stocks rose sharply in the first half of 2008 along with oil and other commodity prices, then fell off a cliff in the second half as the deteriorating world economy and financial meltdown caused commodity prices to plunge. Now that things are stabilizing, those prices have been rising again. Crude oil futures recently hit $70 a barrel, more than double the lows they hit in early January, and other commodity prices have similarly rebounded.

Twice during last year's roller-coaster ride, we looked at how these fluctuations were affecting mutual funds--specifically, diversified funds with big stakes in three mining industries (coal, aluminum, and mining [non-ferrous/non-metals]) whose returns are heavily dependent on commodity prices. In March 2008, when commodity prices were still on the rise, we found that most such funds had outperformed their category peers over the previous year. By late August, in sharp contrast, nearly all the funds with the heaviest stakes in these three industries (some but not all the same as in the first list) had three-month returns ranking near the bottom of their categories.

Now that commodity prices have once again reversed course with a vengeance, we thought it would be interesting to revisit the issue one more time. As before, we eliminated sector funds (which would otherwise dominate the list) and looked only at diversified funds, where a big stake in mining stocks can really stand out.

We also left out funds with asset bases of less than $50 million and those that are clones of other funds on the list. With those limits, the following table shows the 10 funds with the largest combined percentage of their portfolios in the coal, aluminum, and mining (non-ferrous/non-metals) industries.

In addition to these percentages, we show each fund's category, the size of its asset base, its percentile rank in its category over the past three months as of June 11, 2009, and its percentile rank in its category in 2008.

 Diversified Funds with Big Bets in Three Mining Industries


( $M )
% Rank
% Rank
Oppenheimer Intl Small Co OSMAX
Foreign Sm/Mid Growth
992.9 22.28 1 97
Auer Growth AUERX
Small Growth
127.1 16.87 4 97
ING International Growth Opp LEXIX
Foreign Large Growth
56.4 11.85 4 92
Quaker Strategic Growth QUAGX
Large Growth
624.6 11.63 98 88
Old Westbury Real Return OWRRX
Moderate Allocation
1,435.7 9.85 12 93
Hennessy Cornerstore Value HFCVX
Large Value
95.2 9.62 2 90
RiverSource Recovery and Infra RRIAX
Large Blend
94.9 9.32 2 --
Columbia Val & Restructuring UMBIX
Large Value
5,782.6 9.30 8 95
Fidelity Leveraged Co Stock FLVCX
Mid-cap Blend
3,617.3 8.67 7 98
Aegis Value AVALX
Small Value
91.1 8.53 2 99
Data as of June 11, 2009.

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