• / Free eNewsletters & Magazine
  • / My Account
Home>Research & Insights>Investment Insights>Five Mutual Funds on the Rebound

Related Content

  1. Videos
  2. Articles

Five Mutual Funds on the Rebound

Are these comeback kids for real?

Arijit Dutta, 05/12/2009

Lately the media has been pointing to a fair amount of "green shoots," signs of recovery in the economy and in the securities market. Markets have generally shown resilience in recent weeks, and some funds in particular have staged remarkable turnarounds within their categories.

Of course, the shadow of 2008's bear market still looms large, and the more recent rally would have to continue much longer for most investors to recover their losses. Still, the year's big comeback stories are heartening. They offer glimpses of what asset classes and securities might afford the best ride into an eventual, full-blown recovery. But even more important, many of these examples highlight managers who either learned important lessons last year or had the conviction to stick to their process in the face of adversity. Those traits point to funds that are likely good buys at any time, including now.

Longleaf Partners LLPFX
Large-Blend
2008 Return: negative 51% (category percentile rank: 97)
2009 Return (year-to-date through May 1): 18% (category percentile rank: 1)

Stocks' terrible run over the past decade has caused many to question the merits of buy-and-hold investing, but this fund's recent turnaround offers plenty of hope for believers of that approach. Many of the same stocks that let the fund down so badly last year, such as Chesapeake Energy CHK and Sun Microsystems JAVA, are now leading it to the top of the large-blend category. In general, veteran managers Mason Hawkins and Staley Cates don't trade much and only buy when they spot deeply undervalued stocks. The 20-stock portfolio is highly concentrated and often results in big sector concentrations as well, which could give some investors pause. Currently, the portfolio has a massive 38% stake in consumer services companies, for example.

Calamos Growth CVGRX
Large-Growth
2008 Return: negative 50% (category percentile rank: 96)
2009 Return (year-to-date through May 1): 14% (category percentile rank: 7)

The bear market's roots lie in the financials-services sector, but economically sensitive sectors like technology also were severely punished last year. However, the tech hardware sector is easily the best one thus far in 2009, so this fund's big overweight has helped. Stock selection has also contributed handsomely, as the portfolio gives top billing to names like Apple AAPL and Research in Motion RIMM that have come back especially strong from last year's debacle. Kudos go to veteran managers John and Nick Calamos for sticking with the portfolio's emphasis on low-debt, globally diversified firms. The duo typically will favor companies with rich growth potential but won't limit the portfolio to traditional growth sectors alone. (It currently has overweights in energy and industrial materials as well, for example.)PAGEBREAK

Columbia Value & Restructuring UMBIX
Large-Value
2008 Return: negative 47% (category percentile rank: 85)
2009 Return (year-to-date through May 1): 6% (category percentile rank: 4)

Manager David Williams has been in the investing business for more than four decades, but he hasn't stopped learning from the market. He fell into some classic value trap financials last year, and the portfolio's heavy concentration in economically sensitive sectors such as energy also caused plenty of trouble. Williams says that he will be more mindful of sector bets and balance-sheet issues in the future. He retains much of his bold, contrarian style, though. The portfolio remains sizably overweight in energy and materials, which have contributed to the fund's strong comeback. If the economy continues to mend, the fund will benefit more than most peers.

blog comments powered by Disqus
Upcoming Events
Conferences
Webinars

©2014 Morningstar Advisor. All right reserved.