Flexibility Fuels This Power Play
With about one-third of its money in foreign stocks, this fund is not for the risk-averse.
Utilities have lagged the stock market's electrifying run-up. Over the past year, Standard & Poor's Utilities index has returned 21.2%, precisely half the gain of the S&P 500-stock index. Lately, however, MFS Utilities (symbol MMUFX) has clobbered its peers and given the broad market a run for the money. Since its 1992 launch, the fund has landed in the top half of its group 14 times in 18 years (including this one).
Manager Maura Shaughnessy, who was present at the creation, chalks up the winning record to flexibility. She and Robert Persons, who became co-manager in 2005, can buy stocks, bonds and convertible securities. They can also invest abroad -- at last word, 34% of assets were in foreign stocks.
In the fall of 2008, the height of the financial crisis, the fund loaded up on Eletropaulo Metropolitana. At the time, says Shaughnessy, the Brazilian electric company was trading at a mere four times cash flow and yielding in the mid-to-high teens. "It was getting killed just because it's in Brazil, which was kind of ridiculous," she says. The stock doubled last year. More recently, MFS bought Portugal Telecom, which, she says, has been taking an undeserved pounding because of concerns about Greece and Portugal.
The same strategy that fuels this fund's wins contributes to its losses. In 2008, for example, it tumbled 38%, or four percentage points more than the average utility fund's loss. The managers stuck to their strategy, though, and MFS Utilities has returned to the top of its class.