Only The Best Funds Will Do

2/20/2012


 

Investors should not waste time holding middling mutual funds. We don't. The Forecasts cuts bait if a fund consistently trails its peer group and scores poorly in our fund-rating system.

FORECASTS RECOMMENDED PORTFOLIO ALLOCATIONS
Fund (Price; Ticker)
Category
Conser-
vative
(%)
Growth
(%)
Buffalo Growth ($27; BUFGX)
Large growth
12
12
Homestead Small Co. ($25; HSCSX)
Small value
7
8
Manning & Napier Int'l ($8; EXITX)
Int'l large value
7
7
T. Rowe Price New Horizons ($35; PRNHX)
Small growth
10
10
Vanguard 500 ($125; VFINX)
Large blend
6
7
Vanguard Dividend Growth ($16; VDIGX)
Large blend
12
12
Vanguard Emerging Mkts. ($28; VEIEX)
Emerging mkt.
0
4
Vanguard GNMA ($11; VFIIX)
Gov't bonds
5
4
Vanguard Selected Value ($20; VASVX)
Midcap value
5
6
Vanguard Total Bond Mkt. ($11; VBMFX)
Interm. bonds
9
0
Vanguard Total Int'l Stock ($14; VGTSX)
Int'l large blend
5
4
Vanguard Wellington ($33; VWELX)
Balanced
6
9
Wasatch Int'l Growth ($20; WAIGX)
Int'l small-cap
5
5
Wells Fargo Advantage Discovery ($26; STDIX)
Midcap growth
6
7
Wells Fargo Advantage High Inc. ($7; STHYX)
High-yield bonds
5
5

With that in mind, we're dropping American Century Heritage ($22; TWHIX) and Heartland Select Value ($29; HRSVX) from our recommended Growth and Conservative Portfolios. Taking their place are Wells Fargo Advantage Discovery ($26; STDIX) and Vanguard Selected Value ($20; VASVX) — two category killers that consistently outperform rivals in both strong and weak markets.

The table below lists seven top picks and category killers. To make the cut, the U.S. stock funds needed to rank among the top 50% of their respective categories over the last one- and five-year periods based on total return. To uncover consistent winners, we looked for funds that outperformed peers in at least three of the last five calendar years. Finally, we screened for funds with below-average expenses that score above 80, ranking them among the top 20% of their category.


Category killers

Fund (Price; Ticker)
Buffalo Growth ($27; BUFGX)
Dreyfus Small Cap Index ($22; DISSX)
Homestead Small Co. ($25; HSCSX)
T. Rowe Price New Horiz. ($35; PRNHX)
Vanguard Dividend Growth ($16; VDIGX)
Vanguard Selected Value ($20; VASVX)
Wells Fargo Adv. Discovery ($26; STDIX)


Wells Fargo Advantage Discovery ($26; STDIX) ranks among the top 12% of its peer group for three- , five- , and 10-year total return. Boasting an impressive fund score of 91, the fund invests primarily in midsized companies with a growth slant. The fund is up 13% so far in 2012.


Vanguard Selected Value ($20; VASVX), which earns a solid fund score of 81, held 64 names on Dec. 31, with financials representing 28% of the portfolio, followed by industrials at 10%. The fund ranks among the top one-third of midcap value funds for five- and 10-year performance. The annual expense ratio of 0.47% is below the category average of 1.38%.

FORECASTS FUND RECOMMENDATIONS
Year-To-Date
--- 12 Months ---
----- 3 Years -----
----- 5 Years -----
Fund (Price; Ticker)
Category
Fund
Score
Return
(%)
Versus
Category
(%)
Return
(%)
Versus
Category
(%)
Annual.
Return
(%)
Versus
Category
(%)
Annual.
Return
(%)
Versus
Category
(%)
Exp.
Ratio
(%)
Buffalo Growth
($27; BUFGX)
Large
growth
86
8.9
(1.7)
3.4
2.2
23.5
3.1
4.4
2.3
1.00
Dreyfus MidCap Index
($29; PESPX)
Midcap
blend
75
10.8
0.7
0.8
1.5
25.8
2.5
3.8
2.4
0.50
Dreyfus Small Cap Index
($22; DISSX)
Small
blend
85
10.2
(0.5)
5.5
5.1
26.0
1.3
3.1
1.6
0.50
Homestead Small Co.
($25; HSCSX)
Small
value
100
11.3
1.0
5.2
5.0
34.2
8.5
7.0
5.5
1.18
Manning & Napier Int'l
($8; EXITX)
Int'l large
value
68
7.2
(0.9)
(9.0)
0.9
15.2
1.2
0.6
5.2
1.11
T. Rowe Price New
Horizons ($35; PRNHX)
Small
growth
99
12.2
0.4
11.9
11.1
33.3
8.3
7.5
4.7
0.81
Vanguard 500
($125; VFINX)
Large
blend
77
7.6
(0.7)
3.4
2.2
20.2
1.1
0.6
0.6
0.17
Vanguard Dividend
Growth ($16; VDIGX)
Large
blend
93
4.0
(4.3)
9.3
8.1
17.7
(1.4)
3.7
3.7
0.34
Vanguard Emerging Mkts.
($28; VEIEX)
Emerging
mkt.
91
14.4
1.4
(3.3)
2.5
26.2
1.2
4.4
2.1
0.35
Vanguard GNMA
($11; VFIIX)
Gov't
bonds
94
0.7
0.3
9.3
1.3
6.8
0.9
6.8
1.1
0.23
Vanguard Interm. Tax
Exempt ($14; VWITX)
Municipal
bonds
65
2.1
0.1
12.6
0.7
6.5
(0.3)
5.4
0.5
0.20
Vanguard Selected Value
($20; VASVX)
Midcap
value
81
7.1
(2.4)
2.0
2.8
22.9
(0.4)
1.5
1.0
0.47
Vanguard S-T Invest.-
Grade ($11; VFSTX)
Short-term
bonds
93
1.3
0.2
3.1
0.5
6.6
1.5
4.4
0.8
0.22
Vanguard Total Bond Mkt.
($11; VBMFX)
Interm.
bonds
60
0.7
(0.9)
9.2
1.5
7.0
(2.7)
6.4
0.6
0.22
Vanguard Total Int'l Stock
($14; VGTSX)
Int'l large
blend
93
10.0
1.0
(8.2)
0.8
17.3
2.2
(2.4)
1.3
0.26
Vanguard Wellesley Inc.
($24; VWINX)
Balanced
99
2.5
(1.3)
11.0
7.3
14.8
2.0
6.3
3.0
0.25
Vanguard Wellington
($33; VWELX)
Balanced
93
4.8
(1.1)
4.9
2.7
15.7
0.5
4.0
2.0
0.30
Wasatch Int'l Growth
($20; WAIGX)
Int'l
small-cap
90
12.6
2.1
2.7
9.9
33.5
11.0
1.2
3.0
1.57
Wells Fargo Adv.
Discovery ($26; STDIX)
Midcap
growth
91
13.3
1.8
4.3
4.6
29.3
5.3
6.7
3.6
1.30
Wells Fargo Adv. High
Inc. ($7; STHYX)
High-yield
bonds
55
3.5
(0.6)
5.6
1.7
15.4
(3.9)
6.3
0.7
0.94

 


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