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20 Funds with the Biggest Outflows in 2006

Looking for bargains where others are bailing out.

Russel Kinnel, 08/21/2006

The funds that have suffered the largest net redemptions so far this year is an intriguing list, with a number of surprises. Some look more like buys than sells to me, but I'm a contrarian.

Below are my comments about the funds that are seeing the most money head out the door. For a complete list of the 20 funds with the greatest net redemptions in 2006, see the table near the end.

Fidelity Magellan FMAGX
Net Outflows: $6.3 billion

It's easy to see why investors are redeeming their shares in this fund. Its huge asset base and poor stock selection have caused it to beat the index in only two of the past six years. Moreover, Harry Lange's early lead versus the index this year turned quickly into a deficit when the markets pounded tech and Japanese stocks in the second quarter. For the year to date, the fund is up just 0.8%, while the S&P has returned 5%.

On the plus side, Lange's tenure here has been too brief to draw any conclusions, and the fund's outflows have the fund down to a more manageable $44 billion. So, I'm more bullish on this fund than I have been in a while, but I still wouldn't buy.

American Century Ultra TWCUX
Net Outflows: $3.9 billion

It's no accident that many of the funds on this list are large blend or large growth. A small-value fund that has underperformed lately might still be up 9% annualized over the past five years. Large-growth underperformers, by contrast, are apt to be in the red.

This fund has made the mistake of getting aggressive in a market that has largely punished aggressive moves. Big bets on Internet-related stocks like Amazon AMZN, eBay EBAY, and Yahoo YHOO have been murder on this fund, as it is having its second bad year in a row. A large-cap growth rally could make this fund a star again, but waiting is tough.

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