Russel Kinnel looks at which funds in the Morningstar 500 produced a top-percentile performance during the past year and why.
A while back, I wrote about top- and bottom-performing funds based on total returns. With 2013 in the books, I thought I would write about the top and bottom on a relative-performance basis. I limited it to funds in the Morningstar 500 but did not exclude unrated or Neutral funds. Here are our top performers.
All told, 11 Morningstar 500 funds produced top-percentile returns in 2013. See the table below for their 2013 performance as well as their current Morningstar Analyst Ratings. Nine of the 11 are Medalists, one is not rated, and one we recently dropped to Neutral.
I'll focus on why each fund performed like it did, but to find out whether you should buy the fund, be sure to read the analysis of each fund's fundamentals.
Artisan International Value ARTKX
This closed Gold-rated fund had a remarkable year, as did Oakmark InternationalOAKIX, the fund that Artisan managers David Samra and Dan O'Keefe used to serve as analysts. Like a lot of foreign-value managers, Samra and O'Keefe were smitten with many European names outside of the eurozone. In fact, the top six names were either British or Swiss. Names like TE Connectivity TEL and Reed ElsevierENL were big winners.
Berwyn Income BERIX
This fund flourished despite having a 30% ceiling on its stock weighting. Strong stock selection with names like Pitney Bowes PBI and Methode Electronics MEIhelped Berwyn Income make up ground on its peers. In addition, the fund's bond portfolio really outperformed because it favors corporate bonds over Treasuries.
Dodge & Cox Balanced DODBX
That's one heck of a comeback from a rough 2008. A bias toward corporate bonds over Treasuries helped on the fixed-income side. Dodge also leaned toward the maximum weighting of around 75% for equities, which proved to be the right call. The fund had some big wins in financials as well as value tech names like Microsoft MSFT and Hewlett-Packard HPQ.
Fairholme Focused Income FOCIX
If we had a strangest fund of the year award, this one might take the prize. Bruce Berkowitz's super concentrated bond fund turned out a 29.9% gain in 2013. The fund owned only debt in MBIA and Sears SHLD, and it paid off big time when MBIA reached a $1.7 billion settlement with Bank of America BAC. Today, the fund appears to own just Sears, Fannie Mae, Freddie Mac, and J.C. Penney JCP debt. It's closed to new investors, and that's probably just as well after its huge gain in 2013.