Biggest Mutual Fund Winners and Losers During the Sell-Off

Stocks made up some ground on Tuesday, but the selling resumed on Wednesday morning, leaving the major stock-market averages deep in the red since stocks started to fall July 23. Unfortunately for investors in stock funds, pockets of true strength have been few and far between. Although bonds--even junk bonds and bank-loan offerings--have held their ground, nearly every stock fund in our database has posted a double-digit loss during the recent sell-off.

Which stock fund types--and individual funds--have held up well, and which have been the hardest hit? Here's a roundup.

Playing a Good Defense
First, the (somewhat) good news: Among U.S. stock funds, those focused on utilities and consumer staples, both of which tend to hold up well during periods of economic weakness, have held their ground better than the broad market during stocks' recent weakness. Market participants no doubt assume that consumers will keep on paying their electric bills and buying paper towels even in a recession; moreover, many consumer-products firms have made strong inroads into emerging markets, which generally have better growth characteristics than do developed markets.

Among diversified fund categories, large-cap offerings have proved far more resilient than small- and mid-cap funds during the recent market swoon. Large-cap funds that emphasize defensive names in the consumer sector have fared particularly well, at least in relative terms.

For example, large-blend offering  Dreyfus Appreciation (DGAGX), with nearly 30% in consumer staples stocks and an emphasis on mega-cap names, has not escaped losses, but it has managed to hold up much better than the S&P 500 during the past month. Holdings such as  Philip Morris (PM),  Apple (AAPL), and  McDonald's (MCD) have provided a cushion.

 Yacktman (YACKX) has also exhibited great resilience during the recent market swoon. In addition to holding a cash cushion amounting to 12% of assets as of midyear, holding another third of the portfolio in consumer-defensive names like  Coca-Cola (KO) and  Sysco (SYY) has helped.

 Sequoia (SEQUX), a  Morningstar Fund Analyst Pick, has also held up like a champ through recent market weakness. Although the fund's consumer cyclical stocks have posted big losses, its cash stake has helped it perform reasonably well on the downside, and a grab-bag of strong-performing holdings, from  International Business Machines (IBM) to  TJX (TJX) has provided an additional buffer.

Large-blend offering Torray (TORYX) has turned in similarly strong relative performance: Although its cash stake is slight, stable-growth blue chips  Johnson & Johnson (JNJ) and  Colgate-Palmolive (CL) have held up well.  Bridgeway Blue Chip 35 , which tracks a custom index of mega-caps, has also posted strong relative performance.

Finally, funds like  Forester Value (FVALX) and  Appleseed (APPLX), whose defensive stances have hurt them during rally years like 2010, have delivered during the recent market swoon: The former fund's manager, Tom Forester, was expecting a different economic scenario--higher interest rates and inflation--when he stuffed the portfolio with mega-caps like  Microsoft (MSFT) and  Wal-Mart (WMT), but those holdings have proved resilient amid recent recessionary worries, too. (A sizable cash stake has also helped.) Appleseed, meanwhile, has held up well as a result of its Big Pharma names as well as a healthy dose of physical gold exchange-traded funds.

On the international front, the Japanese market has been a rare pocket of strength; diversified Asia funds have also held up relatively well. Unfortunately for fund investors (at least recently), such funds aren't widely owned. But some large diversified funds have bought heavily into Japan and benefited; they include  IVA International ,  First Eagle Overseas (SGOVX), and  Nuveen Tradewinds International Value (NAIGX).

And Bringing Up the Rear
Unfortunately for investors, the list of investments with notably large recent losses dwarfs the lineup of funds that managed to hold up well on the downside. In general, the smaller or more cyclically oriented the fund, the worse it has done during the sell-off. Offerings focused on small caps, industrials, and real estate have all struggled mightily.

Among widely held small-company offerings,  Royce Opportunity (RYPNX) and Fidelity Small Cap Stock (FSLCX) have been hard-hit: Both funds were down more than 20% for the year to date through Monday. The Royce offering's emphasis on tiny companies has worked against it as investors have favored blue chips. The Fidelity fund, meanwhile, has been heavily tilted toward cyclically oriented firms in the airline and semiconductor industries; such stocks have been hard-hit amid concerns over sputtering economic growth.  Schneider Small-Cap Value  has also suffered for its cyclical exposure. (Large-cap sibling  Schneider Value  has been a similarly lousy performer.)

Small-cap offerings with a growth/momentum focus have also struggled, including  Oberweis Emerging Growth (OBEGX),  Turner Small Cap Growth , and  Bridgeway Small-Cap Growth .

Among widely held large-cap funds,  Fairholme (FAIRX) has been on a downward spiral recently, losing 9% of its value on Monday alone. Top holdings  American International Group (AIG) and  Bank of America (BAC) have been the portfolio's biggest losers.

Bill Miller's  Legg Mason Capital Management Opportunity (LMOPX) has also performed abysmally. As with Fairholme, financials have caused pain here:  Assured Guaranty (AGO),  Genworth Financial (GNW), and  MGIC Investment (MTG) have all posted huge losses.  Eastman Kodak  has also cratered.

Due to the darkening picture in Europe as well as potentially slower growth in emerging markets, most foreign-stock funds haven't fared any better than U.S-focused offerings lately, and in some cases they've done even worse. Latin America offerings have struggled as a group; though  T. Rowe Price Latin America (PRLAX) has held up well relative to its peers, its recent losses have been large in absolute terms. Among diversified foreign-stock funds, a few Janus offerings have posted notably poor results, including  Janus Overseas (JAOSX) and  Janus Global Select (JORNX). The funds have had a grab-bag of struggling issues, including economically sensitive names like airlines as well as banks and exposure to hard-hit emerging markets such as Brazil.

 

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