Money Flows Into U.S. Funds

3/21/2011


Mutual fund investors are buying American. In January and February, U.S. stock funds saw their first net inflows since April, outselling international funds for the first time since May 2009.

If you are considering adding a U.S. stock fund, check out the 12 attractive options in the table below. Using our fund-rating system, we screened for U.S. stock funds with scores above 80, placing them among the top 20% of their peer group.

STANDOUT U.S. STOCK FUNDS
Fund (Price; Ticker)
Fund
Rating
12 Mo.
(%)
3 Yr.
(%)
Exp.
Ratio
(%)
Category
Baron Opportunity
($15; BIOPX)
96
22.4
11.3
1.44
Midcap Growth
Berwyn ($30; BERWX)
88
22.2
9.7
1.32
Small-Cap Value
Buffalo Growth ($25; BUFGX)
95
17.8
8.2
0.94
Large-Cap Growth
Dreyfus Disciplined Stock
($31; DDSTX)
84
14.6
2.3
1.00
Large-Cap Blend
Dreyfus MidCap Index
($29; PESPX)
96
21.6
8.7
0.50
Midcap Blend
FMI Focus ($31; FMIOX)
88
23.0
13.8
1.30
Small-Cap Blend
Homestead Small Co.
($24; HSCSX)
100
30.9
13.3
1.24
Small-Cap Value
T. Rowe Price Div. Sm. Cap
($17; PRDSX)
93
29.8
12.6
1.25
Small-Cap Growth
T. Rowe Price New America
($34; PRWAX)
90
16.6
8.5
0.89
Large-Cap Growth
Vanguard Large Cap Idx.
($24; VLACX)
83
14.0
2.5
0.26
Large-Cap Blend
Weitz Partners Value
($21; WPVLX)
99
20.0
8.7
1.26
Large-Cap Blend
Westcore Select ($22; WTSLX)
100
25.6
12.0
1.16
Midcap Growth

Fund ranks are based on total returns, risk-adjusted performance, expenses, and tax efficiency. In addition, all 12 funds share these qualities:

• Performance that has outstripped peer-group averages for the last one, three, and five years.

• Below-average expense ratios. Numerous academic studies illustrate the positive impact of low expenses on fund returns.

• A veteran manager at the helm. For all 12 funds, the lead portfolio manager has been on duty for at least four years, while the average tenure for the 12 funds tops 11 years.

• Effective management, as measured by above-average Sharpe ratios and alpha. Sharpe ratio is a reward-to-risk metric that compares a fund’s return in excess of the T-bill return to its volatility. Alpha measures the difference between actual returns and the returns expected based on risk.

• Solid relative performance in good times and in bad. Based on upside and downside data calculated by Morningstar, all 12 funds performed better than peer-group averages during both rising and declining markets.

A top pick — and member of our recommended portfolios — is reviewed below. Full-term subscribers may request a full-page report on any Forecasts recommended fund or retrieve one on our Web site at www.DowTheory.com.

Buffalo Growth ($25; BUFGX) is a top pick among large-cap growth funds. The fund, which emphasizes companies likely to benefit from international expansion, ranks among the top 9% of its peers for three- , five- , and 10-year performance. The fund, which on Dec. 31 held 55 stocks, has a low portfolio-turnover ratio of 30% a year. The portfolio is tilted toward technology and health-care stocks. Buffalo Growth has an annual expense ratio of 0.94% and requires a minimum investment of $2,500.

 

FORECASTS FUND RECOMMENDATIONS
Through Mar. 15, our recommended Growth Portfolio has returned 0.8% for the year, versus 1.5% for its benchmark portfolio. The Conservative Portfolio has returned 0.9%, versus 1.1% for its benchmark.
— Year-to-Date —
—– % of Portfolio –—
Fund (Price; Ticker)
Return
(%)
Rank
Conser-
vative
(%)
Growth
(%)
Fund
Rating
American Century Heritage
($21; TWHIX)
1.5
D
9
10
65
Buffalo Growth
($25; BUFGX)
0.5
D
9
10
95
Dreyfus MidCap Index
($29; PESPX)
4.0
A
0
0
96
Dreyfus Small Cap Stock Index
($21; DISSX)
1.3
C
0
0
51
Heartland Select Value
($30; HRSVX)
3.1
B
7
10
73
Heartland Value Plus
($30; HRVIX)
1.0
C
9
10
98
T. Rowe Price Int’l Discovery
($42; PRIDX)
(4.1)
B
5
6
40
T. Rowe Price New Horizons
($35; PRNHX)
3.8
B
9
10
96
Vanguard 500 Index
($119; VFINX)
2.3
B
5
5
65
Vanguard Dividend Growth
($15; VDIGX)
2.2
C
8
9
91
Vanguard Emerging Mkts.
Stock Indx. ($29; VEIEX)
(4.6)
B
0
5
95
Vanguard GNMA ($11; VFIIX)
0.9
A
4
0
96
Vanguard Inter.-Term Tax
Exempt ($13; VWITX)
1.3
B
0
0
84
Vanguard International Value
($31; VTRIX)
(2.5)
D
8
6
71
Vanguard Short-Term Invest.
Grade ($11; VFSTX)
0.9
B
0
0
82
Vanguard Total Bond Mkt. Index ($11; VBMFX)
0.8
E
12
0
54
Vanguard Total Int’l Stock
Index ($15; VGTSX)
(2.7)
D
6
6
84
Vanguard Wellesley Income
($22; VWINX)
1.7
A
0
0
96
Vanguard Wellington
($32; VWELX)
1.9
A
5
8
86
Wells Fargo Advantage High
Income ($7; STHYX)
2.6
D
4
5
61
* Year-to-date ranks through Mar. 15 from Morningstar, comparing performance among funds with same objectives. A = top 20%; B = next 20%; C= middle 20%; D = next 20%; E = bottom 20%. Fund ratings are percentile ranks based on our fund-rating system.

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