Index Beaters

Index Funds

Index Beaters

Although Standard & Poor's 500-stock index is the most popular yardstick for judging the performance of stock funds, it's not a fitting benchmark for every fund. For example, measuring a fund that holds small companies against the large-company-dominated S&P 500 wouldn't be an apples-to-apples comparison. So we looked for funds that have consistently beaten their own benchmarks on a calendar-year-to-calendar-year basis from December 31, 1989, through December 31, 2006. This time frame covers a wide range of market conditions, including the bear markets of 1990 and 2000-02 and the speculative frenzy of the late '90s.

The result: Long-term winning streaks are scarce. Relatively few funds date back to 1990, and of those that do, none has beaten its bogey each year. Broker-sold Templeton World (symbol TEMWX), which invests in the stocks of both foreign and U.S. companies, comes closest, having trumped the MSCI World index in 15 of the past 17 years.

Several no-load funds in the accompanying table are compelling. Manager Thomas Soviero has chalked up big returns at Fidelity Leveraged Company Stock (FLVCX) by investing in stocks of companies that carry a lot of debt on their balance sheets. SSgA Emerging Markets (SSEMX) employs a quantitative approach to identify companies in developing nations with strong earnings growth and reasonably priced shares. Manager Brian Barish, of Cambiar Opportunity (CAMOX), seeks to cut risk by investing in large companies at discount prices (see A Streak You Shouldn't Overlook, Aug.).

Selected funds that have beaten their benchmarks in at least 85% of calendar years since 1990:

Driehaus Emerging Markets 9/9
Target Growth Allocation 8/8
Cambiar Opportunity* 8/8
Goldman Sachs Eq Gro Strat 8/8
Turner Emerging Growth* 8/8
Oakmark Global* 7/7
Fidelity Leveraged Co Stock 6/6
SSgA Emerging Markets* 12/11
Marshall Small-Cap Growth 10/9
Templeton World 17/15
SOURCE: ©2007 Morningstar Inc.

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