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The Top 10 Fund Value Creators and Destroyers

Which funds generated the greatest dollar returns in 2005?

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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?

If you prefer to see return figures, you should go to our Fund Quickrank tool and run the figures yourself.

Who Created the Most Value?
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

NetValue($Mil)2005Return
American Funds Growth Fund of America (AGTHX)Large Growth15,13614.23%
American Funds EuroPacific Growth (AEPGX)Foreign Large Blend11,88221.12%
Fidelity Contrafund (FCNTX)Large Growth7,90116.23%
American Funds Capital World Growth & Inc (CWGIX)World Stock6,34814.72%
American Funds Investment Comp of America (AIVSX)Large Value5,1326.87%
Vanguard 500 Index (VFINX)Large Blend4,9564.77%
Fidelity Diversified International (FDIVX)Foreign Large Growth4,65417.23%
American Funds New Perspective (ANWPX)World Stock4,46611.28%
Dodge & Cox Stock (DODGX)Large Value4,4109.37
Vanguard Total Stock Market Index (VTSMX)Large Blend3,7815.98
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.

Who Destroyed the Most Value?
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)2005Return
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.

Russel Kinnel does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.