Tag Archives: fsutx

Relevance Of Portfolio Holdings: 3 Concentrated Funds To Buy And Sell

In our previous article, we discussed how concentrated mutual funds rely on the limited numbers of stock holdings that they own. Focused funds invest in a limited number of companies, rather than having a diversified portfolio. In this context, we showed how Sequoia Fund (MUTF: SEQUX ), which has slumped nearly 70% since Oct. 18, has learnt a lesson for its nearly 30% exposure to Valeant Pharmaceuticals (NYSE: VRX ). We also spoke of funds such as Fairholme Allocation (MUTF: FAAFX ) and Fidelity Select Computers Portfolio (MUTF: FDCPX ) that have gained on the strong performance of its core holdings. However, both FAAFX and FDCPX had a relatively higher number of total issues in stock holdings. The number of holdings in a portfolio may be considered one of the measures of portfolio risk. A lower number of total issues will indicate that the fund is more concentrated and is thus more vulnerable to fluctuations in these holdings. So, if a fund invests in just five stocks, it is highly susceptible to fluctuations in them. Though northward bound stock holdings brighten the prospects of concentrated funds, the advantage of portfolio diversity is denied. In case of a well-diversified portfolio, losses in some stocks may be offset by gains in others. In addition to the number of holdings in a portfolio, the percentage of assets invested in stocks is also crucial. A fund with the bulk of its assets invested in a particular stock is most likely to be guided by the performance of that stock. This time, let’s look at three Sell-ranked concentrated mutual funds that have total issues in the stock holdings below 30 and have underperformed in recent times. For investors ready to gamble, we will also pick three Buy-ranked concentrated mutual funds that have outperformed broader markets despite holding a limited variety of stocks in its portfolio. 3 Sell-Ranked Concentrated Funds These mutual funds either carry a Zacks Mutual Fund Rank #4 (Sell) or Zacks Mutual Fund Rank #5 (Strong Sell) and have total issues in the stock holdings below 30. These funds have underperformed over the year to date and 1-year periods. The minimum initial investment for these funds is below $5000. Fidelity Select Utilities Portfolio (MUTF: FSUTX ) seeks capital growth over the long run. FSUTX invests the lion’s share of its assets in common stocks of companies primarily involved in the utilities sector, and companies that derive the major portion of its revenues from operations related to this sector. FSUTX invests in both U.S. and non-U.S. firms. FSUTX currently carries a Zacks Mutual Fund Rank #5. The number of holdings in FSUTX’s portfolio is 24. FSUTX has lost 11.3% year to date and is down 10.6% over the last 1-year period. FSUTX’s top 3 holdings include NextEra Energy (NYSE: NEE ), Exelon (NYSE: EXC ) and Sempra Energy (NYSE: SRE ) and the fund has invested respectively 15.7%, 12.8% and 10.5% in them. NextEra Energy, Exelon and Sempra Energy have lost 4%, 20.8% and 7.3%, respectively, so far this year. Tocqueville Select (MUTF: TSELX ) invests in a focused number of small and mid-sized domestic companies. TSELX normally invests in a focused group of 30 stocks. A maximum of 25% of its assets may be invested in non-US securities. TSELX currently carries a Zacks Mutual Fund Rank #4. The number of holdings in TSELX’s portfolio is 27. TSELX has lost 10% year to date and is down 8.2% over the 1-year period. TSELX’s top 3 holdings include Web.com Group, j2 Global (NASDAQ: JCOM ) and Minerals Technologies (NYSE: MTX ) and the fund has invested 6.2%, 5% and 4.8% in them, respectively. While Web.com Group and j2 Global have gained respectively 29.6% and 32.4% year to date, Minerals Technologies has lost 12.1%. AMG SouthernSun Small Cap Investor (MUTF: SSSFX ) invests in common stocks of small cap US firms. Market capitalizations of these companies (at the time of purchase) are within the capitalization range of firms listed in the Russell 2000 Index. SSSFX currently carries a Zacks Mutual Fund Rank #5. The number of holdings in SSSFX’s portfolio is 26. SSSFX has lost 12% year to date and is down 15.3% over the 1-year period. SSSFX’s top 3 holdings include AGCO Corp. (NYSE: AGCO ), Darling International (NYSE: DAR ) and Centene Corporation (NYSE: CNC ) and the fund has invested 5.7%, 5.3% and 5.2% in them, respectively. So far this year, while AGCO and Centene have gained a respective 7.5% and 14.5%, Darling International has lost 48.6%. 3 Buy-Ranked Concentrated Funds A counter argument in case of concentrated funds is that well-chosen stock picks that are surging can also translate into significant gains for mutual funds. So, for investors ready to bet, below are 3 mutual funds that either carry a Zacks Mutual Fund Rank #1 (Strong Buy) or Zacks Mutual Fund Rank #2 (Buy) and have total issues in the stock holdings below 30. These funds have garnered decent gains over the year to date and 1-year periods. The minimum initial investment in these funds is below $5000. Davis Financial A (MUTF: RPFGX ) uses Davis Investment Discipline to invest a minimum of 80% of its net assets in securities issued by companies engaged in the financial services sector. These companies own financial services-related assets that are at least 50% of the value of total assets or earn a minimum of 50% of revenues from offering financial services. RPFGX currently carries a Zacks Mutual Fund Rank #2. The number of holdings in RPFGX’s portfolio is 28. RPFGX has gained 3.8% year to date and is up 5.6% over the 1-year period. RPFGX’s top 3 holdings include Wells Fargo & Co. (NYSE: WFC ), Markel Corporation (NYSE: MKL ) and American Express (NYSE: AXP ) and the fund has invested 8.9%, 6.9% and 6.6% in them, respectively. While Wells Fargo and Markel have gained 4.8% and 31.8% respectively year to date, American Express has lost 20.6%. ICON Consumer Staples A (MUTF: ICRAX ) invests most of its assets in equities of companies belonging to the Consumer Staples sector. ICRAX may invest in common stocks and preferred stocks of companies of all sizes. ICRAX currently carries a Zacks Mutual Fund Rank #2. The number of holdings in ICRAX’s portfolio is 23. ICRAX has gained 2.6% year to date and is up 5% over the 1-year period. ICRAX’s top 3 holdings include CVS Health (NYSE: CVS ), Reynolds American (NYSE: RAI ) and Tyson Foods (NYSE: TSN ) and the fund has invested 8.3%, 7.3% and 7% in them, respectively. Year to date, Reynolds American and Tyson Foods have gained 46.7% and 11.7%, while CVS Health has lost 2.5%. Smead Value Investor (MUTF: SMVLX ) keeps roughly 25-30 firms in its portfolio and invests in common stocks of large-cap firms. SMVLX currently carries a Zacks Mutual Fund Rank #2. The number of holdings in SMVLX’s portfolio is 26. SMVLX has gained 4.9% year to date and is up 7.9% over the 1-year period. SMVLX’s top 3 holdings include NVR Inc. (NYSE: NVR ), Amgen (NASDAQ: AMGN ) and Tegna (NYSE: TGNA ) and the fund has invested 6%, 5.9% and 5.8% in them, respectively. NVR, Amgen and Tegna have gained 29.6%, 2.1% and 10.6% respectively year to date. Original Post

3 Top Performing Utilities Mutual Funds In 2014 – Mutual Fund Commentary

Even during a market downturn, the demand for essential services such as those provided by utilities, remains virtually unchanged. Utilities funds are therefore an excellent choice for investors seeking a steady income flow through consistent yields from dividends. This is also why they are primarily considered to be a relatively more conservative investment option. In recent times their forays into emerging markets have led to appreciably higher returns and they offer superior returns at a relatively lower level of risk. The US equities have enjoyed another year of strong gains this year. The Dow, S&P 500 and the Nasdaq are up 8.7%, 12.3% and 14.1%, respectively so far this year. Fortunately, the momentum is evident in the Utilities mutual funds as well. With 16.9% gains (as of Dec 23), the Utilities sector is the third highest sector equity mutual fund gainer so far this year. Also, among the S&P industry groups, Utilities Select Sector (NYSEARCA: XLU ) is the second highest gainer this year as it boasts year-to-date return of 24.1%. We will be picking the top 3 Utilities mutual funds this year based on their year-to-date returns and favorable Zacks Mutual Fund Rank among others. However, before doing so, let’s look at the positives for the sector. Keep reading our Mutual Fund Commentary section, where we are reporting on performances and best picks from fund families and other categories. YTD Sector Performance Sector Equity Funds Returns YTD (%) 1 Year (%) Real Estate 29.48 29.51 Health 24.45 25.53 Utilities 16.94 18.07 Technology 13.95 15.12 Global Real Estate 12.22 13.31 Consumer Defensive 11.81 13.22 Industrials 9.02 10.5 Energy Limited Partnership 7.04 8.95 Financial 6.35 7.06 Consumer Cyclical 6.17 7.56 Communications 2.77 4.52 Miscellaneous Sector 0.19 1.97 Natural Resources -11.68 -9.9 Equity Energy -15.39 -14.39 Equity Precious Metals -15.58 -12.19 Source: Morningstar Strength in Utilities Sector The biggest positive as well as the fundamental strength of the utilities is that there is hardly any viable substitute for their services. The global invasion of electrical gadgets and therefore the endless need for electricity and utility services is an added advantage. The utility operators generate more or less stable earnings unless there are severe factors disrupting their operations. These operators likewise reward their shareholders through the payment of stable and growing dividends. In their pursuit to improve the standard of services, utility operators have relentlessly pursued research and development work. Keeping the rise in demand and efficient use of power in mind, the operators have brought new smart meters, transmission and distribution lines, and gas pipelines into operation. Utility operators are also benefiting from ongoing research work in the solar photovoltaic (PV) sector. Solar energy is a growing alternate energy source and the new solar cells with higher conversion rates allow operators to generate more power with fewer solar panels. This enables the operators to lower the cost of generating power from alternate sources as these are generally more expensive than fossil fuel sources. Apart from spreading business organically, the players in the utility space make strategic mergers and acquisitions, which lead to cost synergies and better utilization of resources. We believe that in a mature energy market like the United States, mergers and acquisitions represent a sure way to enhance market share. Best Performing Utilities Mutual Funds We will pick 3 top utilities mutual funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy) as we expect the funds to outperform its peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but the likely future success of the fund. These funds also have high returns year to date. The funds have relatively low expense ratio and carry no sales load. The maximum initial investment required for these funds is $5000. Fidelity Select Utilities Portfolio (MUTF: FSUTX ) seeks growth of capital. It invests most of its assets in companies related to the utilities industry or firms that earn most of their revenues from utility operations. The non-diversified fund uses fundamental analysis and also looks into market and economic conditions for taking investment decisions. FSUTX has returned 20.3% year to date. The fund carries an annual expense ratio of 0.80% as compared to category average of 1.28%. FSUTX carries no sales load. Fidelity Advisor Utilities I (MUTF: FUGIX ) invests a majority of its assets in utilities companies and those deriving most of their revenues from utilities sector. The fund invests in both US and non-US companies. FUGIX has returned 20.2% year to date. The fund carries an annual expense ratio of 0.84% as compared to category average of 1.28%. FUGIX carries no sales load. MFS Utilities I (MUTF: MMUIX ) seeks total return. The fund invests a lion’s share of its assets in utilities companies, which are engaged in production, generation and distribution of electric, gas or other types of energy, and those involved in telecommunications and cable business. The fund mostly invests in equities, but may also invest in debt instruments. MMUIX has returned 12.8% year to date. The fund carries an annual expense ratio of 0.76% as compared to category average of 1.28%. MMUIX carries no sales load.