Are Fund Reopenings Contrarian Buy Signals?
The bear market produced some great opportunities for fund investors.
During 2008's gloomy market, approximately 90 distinct mutual funds reopened their doors because their asset bases dwindled or the fund managers wanted the extra cash to go bargain-hunting. In March we highlighted an eclectic group of reopened funds that were worth considering. Despite the negative sentiment pervading the market at the time, that turned out to be a good time to invest in equity funds. The past week notwithstanding, the broad stock market has leapt by about 50% since early March. Many funds that threw open their doors in the midst of 2008's turmoil have rallied, too. Here we take a closer look at the performance of small-cap funds that reopened in 2008.
Reopening Low, Heading Higher
Nearly 30 domestic small-cap funds reopened in 2008, and most of them have soared past their peers during the rally that began on March 9, 2009. About half landed in the top third of their respective categories for the year to date ended Aug. 31, 2009. The top 10 performers are in the table.
All these funds lagged their peers last year but land near the top of their respective categories so far this year and since the March 9, 2009, market bottom. The funds' gains from March 9 to Aug. 31 ranged from 58% for both Wasatch Ultra Growth (WAMCX) and Wasatch Small Cap Growth (WAAEX) to 112% for Schneider Small Cap Value (SCMVX), one of the funds we highlighted in March.
Karin Anderson does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.