• / Free eNewsletters & Magazine
  • / My Account
Home>Research & Insights>Investment Insights>The Top 10 Fund Value Creators and Destroyers

Related Content

  1. Videos
  2. Articles
  1. Jacobson's Picks for Core Bond Exposure

    Morningstar's director of fixed-income research offers his tips for selecting a solid core bond fund along with some of his favorite choices.

The Top 10 Fund Value Creators and Destroyers

Which funds generated the greatest dollar returns in 2005?

Russel Kinnel, 01/24/2006

Get mutual fund and stock information from our analyst team delivered to your e-mailbox every Tuesday. Sign up for our free Investment Insights e-newsletter.

A company's bottom line is its profits expressed in dollar terms. For mutual funds, we usually think of the bottom line in total return percentage figures. However, there's something to be said for looking at a mutual fund's results in dollar terms, too.

If you back out cash flows and simply look at how much value a fund created or destroyed for its shareholders, you effectively have the bottom line of the fund's investors. Once a year, I like to do this to see which funds made the most money for shareholders in dollar terms. Specifically, we're looking at how much the fund's portfolio appreciated or depreciated without the effects of inflows or outflows. In other words, what return did the fund's investments generate?

Value Creators

What I like about this measure is it shows which large funds were able to produce results after they became huge. To be sure, looking at it in dollar terms biases things in favor of the largest funds, but, hey, it's only a once-a-year thing.

Not surprisingly, American Funds, which dominates the list of biggest funds, also dominates the list of biggest value creators in a year when most stock funds had positive returns.

 2005's Value Creators
 

Category

Net Value
($Mil)
2005
Return
American Funds Growth Fund of America AGTHX
Large Growth
15,136
14.23%
American Funds EuroPacific Growth AEPGX
Foreign Large Blend
11,882
21.12%
Fidelity Contrafund FCNTX
Large Growth
7,901
16.23%
American Funds Capital World Growth & Inc CWGIX
World Stock
6,348
14.72%
American Funds Investment Comp of America AIVSX
Large Value
5,132
6.87%
Vanguard 500 Index VFINX
Large Blend
4,956
4.77%
Fidelity Diversified International FDIVX
Foreign Large Growth
4,654
17.23%
American Funds New Perspective ANWPX
World Stock
4,466
11.28%
Dodge & Cox Stock DODGX
Large Value
4,410
9.37
Vanguard Total Stock Market Index VTSMX
Large Blend
3,781
5.98
Morningstar data.

The top five funds on this list are particularly deserving of kudos. Not only are they large, but they also outperformed their peers. In fact, Growth Fund of America AGTHX, EuroPacific Growth AEPGX, and Fidelity Contrafund FCNTX shot the lights out with top-decile returns. For Growth Fund of America, energy stocks plus Google GOOG and Corning GLW produced those awesome returns. For EuroPacific Growth, big investments in Japan and Latin America produced another outstanding year. For Contrafund, manager Will Danoff made a great bet on energy, but he also had winners in other areas like Genentech DNA and Google.

The other noteworthy performance came from Dodge & Cox Stock DODGX, which was our runner-up for Manager of the Year. The fund produced top-quartile returns thanks to a diverse bunch of names such as Hewlett-Packard HPQ, Cardinal Health CAH, and Matsushita MC.

Dodge & Cox Stock and Fidelity Diversified International FDIVX also merit bonus points as being the only funds on this list that knew when to push away from the table and close to new investors. The two Vanguard index funds get a pass since asset size isn't a problem for index funds.PAGEBREAK

Value Destroyers

Now to the matter of which funds lost the most in dollar terms. Most parts of the market made money, so there weren't a lot of sizable funds racking up losses.

As proof of how tough it is for fund investors to make good macroeconomic calls, there are a number of foreign bond funds on the value destroyers list. Betting against the dollar seemed like a sure thing, but the greenback had a surprising rally instead. That in turn burned most foreign bond funds because most don't hedge their currency exposure.

 2005's Value Destroyers
 

Category

Net Value
($Mil)
2005
Return
Allianz OCC Renaissance PQNCX
Mid-Cap Value
-394
-4.35%
T. Rowe Price International Bond RPIBX
World Bond
-156
-8.18%
Rydex Juno Investor RYJUX
Bear Market
-151
-4.95%
Weitz Value WVALX
Large Value
-135
-2.77%
Oakmark I OAKMX
Large Value
-103
-1.31%
American Century International Bond BEGBX
World Bond
-101
-8.23%
SEI International Fixed-Income SEFIX
World Bond
-97
-9.85%
White Oak Select Growth WOGSX
Large Growth
-97
-5.11%
BlackRock International Bond CIFIX
World Bond
-81
-9.76%
American Funds Capital World Bond CWBFX
World Bond
-72
-2.86%
Morningstar data.

Some stock funds did make the list, though. Not only did they pick some poor performers, but they also avoided hot commodity areas such as energy and metals. Allianz OCC Renaissance PQNCX suffered from a lack of big winners and a few weak picks like Waters WAT, which makes instruments for the drug industry, Royal Caribbean RCL, and Pfizer PFE.

Two very good value investors, Wally Weitz and Bill Nygren, also made the list. Besides underweighting energy, the two also suffered a typical fate of the value investor: They were early. Weitz, in particular, bought some falling stocks that continued to drop for Weitz Value WVALX. He also held a fair amount in cash, which held the fund back a bit. At Oakmark OAKMX, Nygren thought some neglected blue chips were much more attractive than energy. So far, the market has disagreed, but we still like the fund. I'm less enthused about White Oak Select Growth WOGSX, which seems to disagree with the market every year.

For world-bond funds, it really was just a matter of foreign currency exposure. Some had either U.S. bonds or a currency hedge to limit the damage. Those that didn't wound up on this list.

blog comments powered by Disqus
Upcoming Events
Conferences
Webinars

©2014 Morningstar Advisor. All right reserved.