The 10 Biggest Wealth-Creating Funds of 2004
American, Vanguard, and Fidelity led the way.
Fund Spy
Morningstar analyst Karen Wallace calls these funds cleanup hitters. Cleanup hitters don't just get hits; they get hits with men on base, so their hits count for more.
It's one thing to put up big returns when a fund is tiny, but when everyone and their brother owns it and you still earn big returns, that's something special. With that in mind, I took a look at which funds have made shareholders the most in dollar terms. (To see the funds that destroyed the most value in 2004, check out last week's column.) The figures are through the end of November 2004.
Vanguard 500 Index (VFINX)
It hasn't been a spectacular year for the S&P 500, but this fund still added $6.8 billion to its shareholders' bottom line. One of the great things about index funds like this one is that they're so diversified that people rarely panic and sell. Thus, they stick around for rallies like we've seen the last two years.
American Funds Growth Fund of America (AGTHX)
This isn't an index fund, but it has also done a good job of retaining investors (not to mention attracting massive inflows this year). The fund has built $6.4 billion in shareholder value in 2004, thanks to a bunch of good picks including Target (TGT), Tyco International , and Biogen (BIIB).
This fund created $6 billion in shareholder value, though its absolute returns are actually much better than the two funds above it on this list. The fund is up 16.53% thanks to a falling dollar and rising emerging-markets stocks.
American Funds Investment Company of America (AIVSX)
It was actually an off year for this fund, as it lagged most of its peers. It was big enough, however, to build $5 billion in value.
Fidelity Low-Priced Stock (FLPSX)
Another great year for Joel Tillinghast. The fund is up 19% this year and it created $5 billion in value for shareholders. At $34 billion, it's amazing that this fund has continued to do as well as it has. That said, there's no doubt that its glory days are behind it.
American Funds Washington Mutual (AWSHX)
Like Investment Company of America, this fund is having an off year. Pharmaceutical stocks have held returns back. Even so, the fund created $4.6 billion in shareholder value.
Fidelity Contrafund (FCNTX)
Some nicely timed bets on eBay (EBAY) and Yahoo have boosted this fund's returns to 13.19% for the year. The fund has created $4.5 billion in value for shareholders. Of the funds on this list, this one has had the most impressive performance. Manager Will Danoff has found lots of winners outside of Internet stocks, too. He's had EnCana (ECA), Patterson Companies (PDCO), and Danaher (DHR). Over the long haul, Danoff's stock-picking has been downright remarkable. He's one of the managers nominated for our Domestic-Stock Manager of the Year award.
American Funds Income Fund of America (AMECX)
This fund's having an outstanding year, too. Its 12% return ranks in the top 5% of the moderate-allocation category. It's a great conservative investment, but long-term returns show it has more than just defense. This year's winners include Verizon (VZ) and Dow Chemical (DOW). In all, the fund created $4 billion in shareholder value.
Vanguard Windsor II (VWNFX)
Value hound Jim Barrow has done an outstanding job here. The fund is up 16.5%, placing it in the top 10% of the large-value category. Through November, the fund created $4 billion in shareholder value. I like Barrow's candor about being a deep-value investor. While some claim that they look for great management and dirt-cheap prices, Barrow freely admits that you've got to accept some crummy managers if you want dirt-cheap prices. Hence names like Tyco and others that have been a boon to shareholders even if they won't be topping the lists of most-admired companies. Although Barrow Hanley runs 70% of the fund, we should also recognize the contributions of the other managers: Hotchkis and Wiley, Equinox Capital Management, Tukman Capital Management, and Vanguard's quantitative equity group.
American Funds Capital Income Builder (CAIBX)
There's a theme here, isn't there? The industry's three giants have all 10 slots. That reflects their size as well as the fact that they are even more skilled at managing money than accumulating inflows. This fund has put up a nifty 15.6% return this year and built $4 billion in shareholder value in the process. This is one of our favorite world-allocation funds for its sound process, strong stock-picking, and low costs.
So Long PIMCO PEA Innovation
On the very day that I announced value-destroyers for the year, one of the destroyers was slated to be merged out of existence. PIMCO said it would merge PIMCO PEA Innovation into the far-superior PIMCO RCM Global Technology DRGTX. It's clearly an upgrade for Innovation shareholders. If the merger brings down expenses for the Global Technology fund, then their shareholders will win, too.
Poll Results
I asked you which fund was most disappointing, and you picked White Oak Growth Stock (WOGSX).
Which fund was the biggest disappointment for you in 2004?
38.2%--White Oak Growth Stock
29.7%-- Fidelity Select Electronics (FSELX)
17.8%-- Firsthand Technology Value
14.3%-- Prudent Bear (BEARX)