TheStreet Search RSS Feed:

Some Top Funds Are Dumping Bonds

Wed, 12 Jun 2013 08:43:43 EDT

NEW YORK (TheStreet) -- Bond funds have been struggling. The average intermediate-term fund dropped 1.9% during the past month. Rising interest rates have caused the losses. When rates climb, bond prices tend to fall. Is it time to start trimming your bond holdings? Some top-performing fund managers think so. These managers oversee balanced funds, which hold mixes of stocks and bonds. Lately the funds have been lowering their allocations to fixed income.

The shift by the managers is worth considering because the funds have all shown deft timing in the past. During the stock downturn of 2008, the managers moved into fixed income, helping to protect shareholders. All the funds finished in the top quarter of Morningstar's moderate allocation category for the past five years. The strong performers include Franklin Income , Madison Diversified Income , Villere Balanced Fund and Westwood Income Opportunity .

Ed Perks, portfolio manager of Franklin Income, has made a particularly dramatic move. Concerned about shaky stock markets in 2011, Perks had two-thirds of assets in fixed income and one third in equities. But now he has reversed the allocations, putting about two thirds in equities. "We lost interest in fixed-income as the market went through a transition in recent years to lower yields," he says. ...

Click to view a price quote on FKINX.

Guggenheim ETF Delivers Reliable Income

Fri, 07 Jun 2013 08:56:37 EDT

NEW YORK (TheStreet) -- Bond investors have taken some lumps lately. During the past month, the Barclays Capital U.S. Aggregate bond index lost 1.6%, according to Morningstar. The slump was triggered by rising interest rates. When rates rise, bonds tend to fall. The hard going has left many investors struggling to find steadier income vehicles.

One solution could be ETFs that hold diversified collections of income sources. Besides foreign and U.S. bonds, the funds own dividend-paying stocks from around the world. The diversified ETFs, which yield 4% to 5%, have proved relatively resilient in the past month. Solid choices include Guggenheim Multi-Asset Income ETF , iShares Morningstar Multi-Asset Income , and SPDR SSgA Income Allocation ETF

A top performer is Guggenheim Multi-Asset Income, which yields 5.2%. The fund holds half a dozen different kinds of securities, including REITs and preferred shares -- which pay bond-like yields. The fund always keeps at least 50% of assets in dividend-paying stocks. Holdings include such blue chips as Verizon and pharmaceutical giant Merck . The portfolio currently has 9% of assets in master limited partnerships (MLPs), which own pipelines and other assets that generate rich income. Boosted by the big stock stake, the fund returned 11.6% this year, compared to a loss of 1.0% for the Barclays Capital U.S. Aggregate index. ...

Click to view a price quote on CVY.

Click to research the Financial Services industry.

Mutual Funds for Cautious Investors

Wed, 05 Jun 2013 11:32:39 EDT

NEW YORK (TheStreet) -- With markets heading for the summer doldrums, this could be a time to consider cautious balanced funds, which hold mixes of stocks and bonds. Balanced managers aim to provide mild-mannered vehicles that can deliver some gains in bull markets and avoid the worst losses in downturns. The steady approach has worked admirably in the erratic markets of the past decade. During the last 10 years, the balanced funds in Morningstar's moderate allocation category returned 7.7% annually, outdoing the S&P 500 slightly while taking less risk.

Classic funds in the moderate allocation category hold about 60% of assets in blue-chip stocks and most of the rest in high-quality bonds. But a few managers spice up the fixed-income recipe by including convertibles, preferred shares or other instruments. These wide-ranging portfolios could be sound choices at a time when interest rates have been climbing. When rates rise, bond prices tend to sink. But convertibles can be more resilient, sometimes gaining when most bonds are falling.

Like bonds, convertibles make fixed interest payments. Convertibles currently yield 2.6% on average. The interest payments tend to prop up values during periods when investors become nervous. When stocks are rising, convertibles can be converted into common shares. As a result, convertibles can deliver some of the upside of stocks. ...

Click to view a price quote on ACEIX.

Fund Managers See Europe's Rally Continuing

Thu, 30 May 2013 10:46:32 EDT

NEW YORK ( TheStreet ) -- After plummeting during the worst days of the euro crisis, European markets have rallied. During the past year, European stock funds returned 33.1%, compared to 28.7% for the S&P 500, according to Morningstar. Can the rebound continue? Some mutual fund portfolio managers think so. They argue European stocks are still cheap. The forward price-earnings ratio of Europe is about 13, compared to a multiple of 15 for the U.S. "The valuations of global businesses are being penalized just because they have headquarters in Europe," says Dan Ison, portfolio manager of Columbia European Equity .

While much of Europe remains mired in recession, portfolio managers argue the picture is brightening. The International Monetary Fund forecasts European GDP will grow 1.5% in 2014. Country economies expected to expand this year include Ireland, Germany, and Sweden. "Europe is on the brink of recovery," says Marc Halperin, portfolio manager of Federated International Leaders . "Business confidence is improving. We are even seeing deposits returning to the Greek banks." >>Also see: PC-mageddon >>

The rebound in European stock markets began last July. At the time, investors fretted that the euro could collapse as countries such as Greece abandoned the currency. To stem the panic, Mario Draghi, president of the European Central Bank, pledged to do "whatever it takes" to save the currency union. The bold statement calmed the markets, and investors raced to buy stocks. ...

Click to view a price quote on AXEAX.

How Bill Gross Topped the S&P 500

Fri, 24 May 2013 12:14:45 EDT

NEW YORK (TheStreet) -- For decades, Bill Gross has been hailed as an outstanding bond manager. His Pimco Total Return became the largest mutual fund by consistently topping the Barclays Capital U.S. Aggregate bond benchmark.

But Gross should also be recognized for another feat: operating stock funds that have surpassed the S&P 500. During the past five years, his PIMCO Fundamental IndexPLUS returned 13.8% annually, compared with 6.1% for the S&P 500, according to Morningstar.

Other winners include PIMCO StocksPLUS Absolute Return , which returned 9.8%, and PIMCO StocksPLUS , which returned 6.7%. ...

Click to view a price quote on PTTPX.

Finding the Best College Savings Plans

Mon, 13 May 2013 10:22:31 EDT

NEW YORK (TheStreet) -- Faced with steep tuition bills, investors have been pouring money into 529 college savings plans.

In 2012, assets in the plans grew 25% to $166 billion, according to Morningstar. Under the savings program, parents or friends of a child can invest in a fund and owe no taxes on the earnings, provided the money is used to pay tuition bills.

The 529 program can be a valuable resource for people who face tuition costs. But investors must shop carefully. Many of the investment choices are expensive and have delivered uninspiring returns. According to Morningstar, the average 529 investment has underperformed conventional mutual funds. During the five years ending in January, the average mutual fund in the conservative allocation category -- which holds a mix of stocks and bonds -- returned 4.3% annually, compared to 3.7% for comparable 529 funds. ...

Click to view a price quote on TROW.

Click to research the Financial Services industry.

Funds That Win by Placing Big Bets

Mon, 29 Apr 2013 10:30:33 EDT

NEW YORK ( TheStreet ) -- In recent years, Fairholme Fund has swung wildly up and down. In 2010, Fairholme returned 25.5%, outdoing the S&P 500 by 10.4 percentage points and topping 99% of its large value peers, according to Morningstar.

The next year, Fairholme lost 32.4% and finished dead last of the 373 competitors in its category. In 2012, the fund came in first. Long-term investors have little reason to complain. During the past 10 years, Fairholme has outdone 99% of its peers. But masses of shareholders have dumped the fund, unnerved by the volatility. Assets have dropped from $18.8 billion in 2010 to $7.6 billion now.

Fairholme portfolio manager Bruce Berkowitz has achieved the high returns and extreme volatility by maintaining a concentrated portfolio. While the average large value fund holds a diversified portfolio with more than 100 stocks, Berkowitz keeps most of his portfolio in 10 unloved stocks. ...

Click to view a price quote on FAIRX.

Getting Big Returns From Tiny Stocks

Thu, 25 Apr 2013 10:25:35 EDT

NEW YORK (TheStreet) -- Not many mutual funds hold micro-cap stocks -- small companies with market values of less than $500 million. The tiny stocks can be hard to trade and prone to periodic crashes.

But micro-caps can be worthwhile holdings, says Hal Ratner, a chief investment officer of Morningstar Investment Management. The smallest stocks sometimes diversify portfolios and deliver winning returns, Ratner says.

To appreciate the potential rewards and risks, consider Aegis Value , a micro-cap specialist. During 2008, the mutual fund lost 51.4%, trailing the S&P 500 by 14 percentage points, according to Morningstar. But the next year, Aegis skyrocketed, gaining 91.4%, topping the S&P 500 by 64 percentage points. The periods of outperformance often compensate for the occasional disappointing years. During the past 10 years, micro-caps returned 12.1% annually, compared to 8.5% for the S&P 500, according to Morningstar/Ibbotson. "Micro-caps can be volatile, but they can give you the potential for strong returns," says Hal Ratner of Morningstar. ...

Click to view a price quote on AVALX.

A New Mutual Fund for Rough Markets

Mon, 15 Apr 2013 10:41:28 EDT

NEW YORK (TheStreet) -- BBH Core Select is one of the most impressive mutual funds of recent years. During the past decade, the fund, which is operated by Brown Brothers Harriman, returned 10.5% annually, outdoing the S&P 500 by 4 percentage points, according to Morningstar.

Besides delivering exceptional returns, this mutual fund was one of the least volatile members of the large blend category as measured by an indicator called standard deviation.

BBH's most outstanding performance came in the turmoil of 2008 when the fund topped the S&P 500 by 15 percentage points and ranked as the top performer in its group. ...

Click to view a price quote on BBTEX.

Municipal Funds That Pay Rich Yields

Thu, 11 Apr 2013 10:41:00 EDT

NEW YORK ( TheStreet ) -- With the Federal Reserve keeping a lid on interest rates, 10-year Treasuries yield a skimpy 1.75%. For a better payout, consider high-yield municipal funds. According to Morningstar, the average fund in the category yields 4.2% tax-free. That is the equivalent of a taxable bond that yields more than 7% for high-income investors. Make no mistake, high-yield municipals are riskier than Treasuries. But at a time when municipal finances are strengthening, the high-yield funds should produce reliable income.

The high-yield funds invest in tax-free debt from states, cities and other issuers. The high-yield municipal funds should not be confused with the better-known high-yield bond funds, which hold taxable corporate bonds. The taxable funds invest almost exclusively in junk bonds that are rated below-investment grade. The junk securities pose clear risks of default. In 2012, 2.6% of junk issues defaulted, according to Moody's. The historical average default rate is 4.8%. In contrast, only a handful of municipal issuers default every year. In 2012, five of the approximately 50,000 issuers defaulted.

High-yield municipal funds limit their risk by diversifying portfolios and holding some high-quality bonds. The typical fund has about one third of assets in bonds that are rated below-investment grade or unrated. Another third are in securities rated BBB, the lowest category of investment-grade issues. A final third are rated A or higher. Because they hold some high-quality issues, high-yield municipal funds tend to be less volatile than their high-yield corporate counterparts. >>Also see: Netflix Jumps on Love From Goldman Sachs >> ...

Click to view a price quote on IYIAX.

Mutual Funds That Can Survive Downturns

Wed, 03 Apr 2013 10:01:53 EDT

NEW YORK (TheStreet) -- Mutual fund shareholders have good reason to cheer. During the past three months, the S&P 500 has returned 10.5%. Now some investors worry that the market is due for a correction.

The bears fear that trouble in Europe or gridlock in Washington could send stocks tumbling. Should you trim your stocks and take shelter? Not yet. Profits are climbing, and the forward price-earnings ratio of the S&P 500 is 13.2, a figure that is less than the long-term average.

But conservative investors should consider buying a steady fund that can limit losses in downturns. Top choices include American Beacon Holland Large Cap Growth , ASTON/TAMRO Diversified Equity and Manor . ...

Click to view a price quote on LHGAX.

2 Winning Large-Growth Mutual Funds

Mon, 25 Mar 2013 10:20:03 EDT

NEW YORK (TheStreet) -- Mutual funds in the large-growth category have taken investors on a rough ride in recent years.

During the turmoil of 2008, the average fund in the group lost 40.7%, lagging the S&P 500 by 3.7 percentage points, according to Morningstar. As investors worried about the euro crisis in 2011, the funds lost 2.5%, trailing the S&P by more than 4 percentage points.

For steadier performance, consider two intriguing mutual funds, Gerstein Fisher Multi-Factor Growth Equity and Rydex S&P 500 Pure Growth . The funds have outdone their average peers and excelled in downturns. While they follow different strategies, both funds have succeeded by tilting toward the smaller members of the large-growth stock universe. ...

Click to view a price quote on GFMGX.

Bond Funds That Should Lead the Pack

Fri, 22 Mar 2013 10:40:56 EDT

NEW YORK ( TheStreet ) -- Bond funds have faced headwinds this year. While the Barclays Capital U.S. Aggregate bond index has dropped 0.2%, long government bonds funds declined 3.0%, according to Morningstar.

The red ink can be traced to rising interest rates. Since the beginning of the year, yields on 10-year Treasuries have climbed from 1.78% to 1.96%. That has caused pain because bond prices tend to fall when rates climb.

But not all funds have suffered. Among the leaders lately are unconstrained bond funds. These have the freedom to buy a wide range of securities and employ strategies that can prosper when most bonds are sinking. ...

Click to view a price quote on SUBFX.

High-Flying Mutual Funds That Crashed

Fri, 15 Mar 2013 10:58:45 EDT

NEW YORK ( TheStreet ) -- Investors have been racing to dump two notable mutual funds: Artio International Equity and CGM Focus . Assets at Artio have fallen from $10.9 billion in 2007 to $753 million now. During the same time, the CGM portfolio fell from $5.4 billion to $1.5 billion. Terrible performance records caused the exodus. During the past five years, CGM lost 7.5% annually, ranking dead last of the 444 large blend funds tracked by Morningstar. Artio lost 5.4% and trailed 96% of its foreign large blend peers.

The sorry performance is especially noteworthy because the funds once ranked as high flyers. At the end of 2007, both funds boasted performance records that were among the greatest ever compiled. In the preceding decade, CGM returned 26.1% annually, compared to 5.9% for the S&P 500. Artio returned 17.2% annually, compared to 8.7% for the MSCI EAFE international index.

What went wrong? Both funds follow unorthodox strategies that worked until the financial crisis disrupted markets. Diehard contrarians, the managers failed to perform in the downturn when the cheapest stocks only got cheaper. In recent years, the cold streak continued. ...

Click to view a price quote on BAC.

Click to research the Banking industry.

Mutual Funds Profit From Merger Spree

Thu, 07 Mar 2013 09:32:36 EST

NEW YORK (TheStreet) -- Corporations are going shopping. The volume of mergers and acquisitions has been increasing, with big deals making headlines, including offers for H.J. Heinz and Dell . All the activity is welcome news for mutual funds that specialize in merger arbitrage. The funds buy stocks that are about to be acquired.

During the financial crisis, deal activity slowed, and some funds were forced to hold fixed-income while they waited for takeover activity to resume. With deals plentiful now, the funds can choose from among many stocks to buy.

In the current positive environment, merger funds are likely to return 4% to 5% this year, say fund portfolio managers. That might sound like a modest result. But merger funds can be attractive investments because they deliver steady results while being only about as volatile as intermediate-term bond funds. "With the merger arbitrage funds, you can get returns in the mid-single digits -- and maybe a little higher in a favorable environment," says Chris Sawyer, a research analyst for Litman Gregory. ...

Click to view a price quote on HNZ.

Click to research the Food & Beverage industry.