Five Morningstar 500 Funds That Lagged in 2013
Caution and natural resources held these funds back in 2013.
Caution and natural resources held these funds back in 2013.
I told you about the top-performing Morningstar 500 funds in 2013. In all, there were 11 in the top percentile.
Now it's time to look at the worst relative performers. There were none in the bottom percentile, but there were two in the next-to-worst and three more in the third-from-worst.
The theme of most of these five laggards was caution. In a year when stocks skyrocketed, it's not surprising that conservative funds would lag. Two of the funds have big cash stakes.
Another theme is exposure to natural resources plays of one kind or another. Slowing growth in China and lower inflation in general hit natural resources stocks hard.
Appleseed (APPLX)
This focused socially responsible investing fund is more aggressive than cautious. Its problem is pretty obvious as it's right at the top of the portfolio. The fund has a 13% position in Central GoldTrust a closed-end fund that only invests in gold bullion. Ouch. That fund lost 26% of its value in 2013. Appleseed also owns a 5% position in Sprott Physical Gold Trust (PHYS), which lost about the same amount. The rest of the portfolio was pretty respectable, but the fund's 19.1% return put it in the next-to-last percentile of mid-value funds. Despite a dismal 2013, the fund is still well ahead of the S&P 500 since its 2006 inception.
Royce Low Priced Stock
Manager Whitney George had a rough year as the fund gained just 12.9%. The Silver- rated fund had a sizable basic materials bet to the tune of about 14%. While that's a fairly small amount of the portfolio, even a small stake in a money-losing sector can kill your performance when just about everything else is up 20%-40%. George has trimmed the bet a little, but the returns are still weak. The fund isn't simply a bull market laggard, though. It was middling in 2008 but surged in the rally years of 2009 and 2010 only to get smacked in the tough year of 2011 as well as the past two years. The fund's 15-year numbers are still strong, but recent returns have been dismal. It needs a rally in materials to turn around.
Amana Growth (AMAGX)
The first part of any performance story about an Amana fund is always the fund's lack of financials. It follows Sharia principles, which forbid it to invest in companies that loan money at interest. It sailed through the financial crisis but has a rough go of it when financials rally, as in 2013. The fund returned a modest 22.8% due to a lack of financials exposure and some sluggish tech names like Sap (SAP) and Apple (AAPL). Retailer PetSmart also held it back.
Virtus Foreign Opportunities
This fund's defensive consumer names and overweighting in India held returns to a meager 5.4%. In addition, Rajiv Jain hasn't been able to find many sustainable growth stocks in Japan and China. Missing out on Japan really stung last year. Still, the fund has thumped peers and the MSCI EAFE since Jain took the helm in 2002.
First Eagle US Value (FEVAX)
It's not surprising that this fund would lag in a rally. Although Jean-Marie Eveillard is no longer running the fund, his belief in putting safety first remains a driving force at the fund. It still holds some cash and gold for a rainy day, and it tends to own cheap defensive names that management hopes will bear up in a down market. Some of its defensive names like Microsoft (MSFT) and Comcast (CMCSA) did just fine, but some value tech stocks and some energy names held the fund back. Thus, the fund gained a relatively modest 16.9% in 2013. The good news is that the amount it lagged the S&P 500 by last year was matched by the amount it outperformed in the bear market.
FundInvestor Newsletter | ||
Want to hear more from the mutual fund experts? Subscribe to Morningstar FundInvestor for exclusive research, coveted analysis and proprietary ratings—neatly packaged and delivered to your inbox. | One-Year Digital Subscription 12 Issues | $125 Premium Members: $115 Easy Checkout |
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals
and individual investors. These products and services are usually sold through
license agreements or subscriptions. Our investment management business generates
asset-based fees, which are calculated as a percentage of assets under management.
We also sell both admissions and sponsorship packages for our investment conferences
and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.