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Fund Spy

Four Different Paths to Great 2009 Returns

Some managers performed well despite shunning the market's hottest sectors.

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Now that 2009 is in the books, it's possible to sit back and take stock of that roller-coaster year for investors. After 2008's disaster, it wasn't tough for the markets to look better last year, and all the major indexes posted substantial gains. The S&P 500 Index jumped 23.5% for the year, the Dow Jones Industrial Average gained 18.8%, and the Nasdaq Composite was up 43.9%.

As with all bull markets, certain investments did better than others in 2009. Some of the biggest gains came from risky assets such as emerging markets, gold, and micro-cap stocks. Of the 12 Morningstar stock sectors, the best performers last year were hardware (including such big gainers as  Apple (AAPL) and semiconductor stocks), industrial materials (including commodity stocks such as  Freeport-McMoRan Copper & Gold  (FCX)), and software (including big Indian outsourcers such as  Wipro (WIT)). The average stock in each of these sectors gained more than 60% in 2009, with many big names, including all three stocks mentioned above, gaining more than 100%.

But it wasn't just these hot sectors that posted big gains last year. The rally was actually pretty broad, with even the worst-performing sector, utilities, up nearly 20%. That's a contrast to the bull market of a decade ago, when anybody who didn't own technology and telecom stocks got left in the dust. To illustrate that point, we looked at funds in the nine categories of the Morningstar Style Box with at least $100 million in assets, and we ranked them by the percentage of their stock portfolios in the three hottest sectors noted above (hardware, industrial materials, and software).

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

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