Mixed Results for the Kiplinger 25
The recent stock market selloff has left some of its claw marks on the Kiplinger 25. From the market’s April 29 peak through its August 8 low, the domestic stock funds among our favorites lost 17.6%, on average, compared with a decline of 17.4% for Standard & Poor’s 500-stock index. The four foreign and global funds on our list sank an average of 20.4%. But, in a testimony to the beauty of diversification, five of our six bond fund picks made money.
The stock funds that focus on smaller companies, including Akre Focus (symbol AKREX), Baron Small Cap (BSCFX) and Meridian Growth (MERDX), were the best performers over the past year. But much of those gains came late in 2010, when investors were more inclined to take risks than they are today. Akre Focus, which mostly holds midsize firms, trailed other Kip 25 funds earlier this year. But Akre powered ahead with bets on defensive stocks, such as discounters Dollar Tree and Ross Stores.
Dodge & Cox Stock (DODGX) has been disappointing. It had been recovering nicely from a dismal 2008, but it suffered a relapse this year. The fund had an above-average weighting in financial-services stocks (16% of assets), which took a drubbing over the summer. A one-third drop in the fund’s largest holding, Hewlett-Packard, didn’t help, either.
The fine results of our favorite bond funds should come as no surprise. Treasury bonds rallied sharply over the summer, benefiting from buying by jittery investors. Many other lower-risk bonds gained, too. But Harbor Bond (HABDX), run by the estimable Bill Gross, lagged its peers because of Gross’s earlier bet against Treasuries. At last word, Gross, who also runs Harbor clone Pimco Total Return (PTTAX), has been boosting the funds’ stakes in Treasuries.
Our “alternative” funds also held up during the correction. Merger Fund (MERFX) lost less than any other stock fund, proving again that it moves to its own beat. Harbor Commodity Real Return Strategy (HACMX) and FPA Crescent (FPACX), a balanced fund that uses some unusual strategies, each lost about 11%.