How Have the Kiplinger 25 Fared?
Fund management has never been a relaxing profession, but over the past year portfolio managers have faced a particularly dizzying array of challenges.
Homebuilding collapsed, housing prices are tumbling and foreclosures are rising; banks and other financial institutions are taking massive write-downs of mortgage-linked assets; consumer demand is tepid and sectors such as autos (and, of course, homebuilding) are in recession.
To add to the stress, prices of oil and other commodities are surging, and the value of the poor dollar keeps shrinking.
So how have members of the Kiplinger 25 list of best no-load funds fared after a one-year run through this gauntlet?
The clear winner is Ken Heebner, whose CGM Focus (symbol CGMFX) rocketed 79% over the past year (all performance data are through November 7). That compares with a modest 9% return for Standard & Poor's 500-stock index during the same 12 months.
Heebner achieved this feat by keeping his pulse on the boom in the global economy, especially the robust growth in emerging markets. Thus, nearly half of his fund's holdings are in foreign stocks and many of his U.S.-domiciled shares, such as Mosaic and Baker Hughes, are direct beneficiaries of the voracious emerging-market appetites for natural resources and materials.
Runner-up to CGM, with a 31% gain, is Bridgeway Aggressive Investors 2, an entirely different, quantitatively driven fund run by John Montgomery. Bridgeway (BRAIX), which invests in companies of all sizes, benefited from a timely move into stocks of larger growth companies.
In third position was Marsico 21st Century (MXXIX), up 28%. Steered by Cory Gilchrist, this growth fund profited from fine stock picking -- its largest holding, MasterCard, was a home run -- and a dramatic shift in allocation from mid-cap into large-cap stocks.
The clear laggards were Muhlenkamp (MUHLX) and Oakmark Select I (OAKLX), managed by Ron Muhlenkamp and Bill Nygren, respectively. Both funds managed to post negative returns, lagging far behind the S&P index, for similar reasons: ill-advised stakes in stocks crushed by the housing recession, such as Washington Mutual and homebuilders.
Overseas funds have been a good place to invest. The MSCI EAFE index rose 21% over the past year. Julius Baer International Equity II A (JETAX), run by Rudolph Riad-Younes and Richard Pell, bested this benchmark with a 25% gain. A 20%-plus weight in emerging markets, mostly in Eastern Europe, aided returns. T. Rowe Price Emerging Markets Stock (PRMSX) skillfully rode the boom in developing countries, posting a sizzling 58% gain.
The overseas laggard was Oakmark International I (OAKIX), which produced a dismal 5% gain. Hurting manager David Herro's performance was his failure to own any energy stocks.
How have the Kiplinger 25 bond funds fared? The two standouts were Loomis Sayles Bond (LSBRX), up 10.2%, and Harbor Bond (HABDX), which gained 6.7%. This compares with the Merrill Lynch US Broad Market bond index rise of 5.8% over the same year. Loomis Sayles, piloted by the redoubtable Dan Fuss and Kathleen Gaffney, was helped by extensive overseas holdings, including bonds in Canada. Harbor, an intermediate-term bond fund, is steered by famed Pimco bond maven Bill Gross.
For the one-year, three-year, five-year and ten-year returns of all Kiplinger 25 members, see our tables.