2001: A Loss Odyssey
By Robert Barker
As we rush toward the end of this year -- the second in a row that has seen the major market indexes drip red ink -- it's only the oddball investor who hasn't already kissed off 2001. Facing facts (a painful if helpful habit), I confess to being one of those oddballs.
I've been looking back at 2001 and this year's archive of barker.online columns. Which funds profiled here rewarded investors? Which didn't? You can see the results for yourself in the . Here's the short of it: The 28 funds featured this year averaged a loss of 4.8% since their respective appearances. For 2001 through Dec. 7, the average loss was 2.2%.
Considering that the Wilshire 5000 Total Market index lost 11.8% and the Standard & Poor's 500-stock index dropped 12.3% during the same period, 2.2% doesn't look half bad. Just the same, to me it's still a reason to try harder next year to look high -- and low -- for even better investment ideas to feature in barker.online. And by better, I mean the kind that create capital gains.
As it turned out, some of the best ideas this year came from a decidedly unexpected -- some might say fresh-faced -- place: Stetson University's student stock-pickers. The group was featured here on Apr. 27 after it won an intercollegiate portfolio management contest (see BW Online, 4/27/01, "Savvy Investors with the Wisdom of Youth"). Two of their favorite stocks, MFC Bancorp (MXBIF ) and trading-card company Topps (TOPP ), delivered gains of 12% and 27%, respectively. Their best pick, however, was Panera Bread (PNRA ), a chain of bakery cafes, which gained nearly 60%.
Among the pros whom I profiled, Oakmark Select's (OAKLX ) Bill Nygren performed well, up 13%. Merrill Lynch's Bob Doll escaped 2001 with barely a nick. His Merrill Lynch Large Cap Core Fund (MALRX ) held its own, with a loss of 0.2%. And Needham & Co.'s Tad LaFountain, a veteran technology analyst, plainly did readers a favor. Back in April, he pointed out short-term opportunity in shares of Cisco Systems (CSCO ), which were then trading at under $15 a share, while I was skeptical about the stock. Cisco is now trading around $20.
Disasters? There was one: Alpha Analytics' Digital Future Fund. Its managers, John Gipson and Mike Cohen, drove the fund to a loss of more than 55% since their joint appearance in a Q&A here last January.
Day trader George Henel, who shared his bear-market thinking in March, favored energy stocks, such as Burlington Resources (BR ) and exports, including Cummins Engine (CUM ) and Caterpillar (CAT ). Henel trades in and out of such stocks several times a day, but they didn't pan out for folks looking at them as longer-term picks. Cat gained 7%, but Burlington (down 28%) and Cummins (off 9%) both fell. Similarly, Vanguard Energy Fund (VGENX ), whose manager Ernst von Metzsch spoke with me in May, lost 14% as the energy sector weakened in the year's second half.
As faithful readers of this column know, I make no claim to having a crystal ball. But I will share with you two of the moves I have made in my own mutual-fund portfolio. I don't know if the good days are all over for small-cap value funds, which this year are far ahead of the pack, with an average return of 13.3% in 2001. But my bet is that the stocks in those funds, so undervalued for so long, are a lot closer to fair valuations today, after two resurgent years. That's why I recently moved a big chunk of my money out of a small-cap value fund and into small- and mid-cap growth funds.
Also, it strikes me that in the coming months, most bond funds have nowhere to go but down. With interest rates already bouncing off lows seen this fall, bond prices are falling (remember, a bond's price moves in the opposite direction from its yield). As the Federal Reserve finishes its cycle of interest rate cuts, I'm wagering that the recent weakness in bonds is only the start of a trend toward higher yields that will keep cutting the prices of most investment-grade bonds.
So I've moved more of my portfolio's bond allocation into a fund devoted to high-yield, or junk, bonds. As the economy recovers, junk-bond prices should rise. Meantime, I can look forward to enjoying a double-digit yield. That should be enough to compensate for the extra risk of junk bonds.
Will my moves prove right? Check back right here one year from now. We'll see what worked and what didn't.
Editor's Note: Barker.online will take a holiday break and return on Friday, Jan. 4. In the meantime, happy holidays!
How Funds Featured in barker.online Fared
Fund Date of Appearance %Gain/Loss Since Appearance* Total Return, Year-to-Date**
*Through Dec. 7, not including dividends **Year-to-date total returns include dividends
American Eagle Capital Appreciation AECAX 1/5 -18.7 -18.2
Fidelity Leveraged Company Stock FLVCX 1/12 -7.9 0.4
Alpha Analytics Digital Future NA 1/19 -55.5 -46.6
Matthews Pacific Tiger MAPTX 1/26 -4.2 10.0
Herzfeld Caribbean Basin CUBA 2/2 -28.4 -6.1
Oakmark Select OAKLX 2/9 13.3 24.3
Legg Mason Focus FOCTX 2/16 -7.9 -5.4
Fidelity Select Health Care FSPHX 3/2 -3.2 -14.1
Kopp Emerging Growth KOPPX 3/16 3.2 -33.2
Needham Growth NEEGX 3/23 8.2 13.3
T. Rowe Price Tax-Free Income PRTAX 4/13 -0.4 4.2
Merrill Lynch Large Cap Core MALRX 4/20 -0.2 -6.3
Boston Partners Small Cap Value II BPSCX 5/11 10.3 41.0
Rockland Small Cap Growth RKGRX 5/18 -13.6 -23.0
Vanguard Energy VGENX 5/25 -14.1 -6.7
North Track PSE Tech 100 PPTIX 6/8 -7.7 -12.0
Salomon Bros. Fund SBF 6/28 -13.9 -20.6
Brandywine BRWIX 7/6 -11.0 -21.8
Acorn USA AUSAX 7/13 -9.2 15.0
Matthews Japan MJFOX 8/17 -10.0 -22.9
Vanguard Intermediate-Term Corporate Bond VFICX 8/24 -1.4 8.2
Vanguard Long-Term Tax Exempt Bond VWLTX 8/24 -2.9 4.4
Aegis Value AVALX 9/21 11.1 38.3
T. Rowe Price Value TRVLX 10/5 9.3 1.9
Marketocracy Medical Specialists MSFQX 10/26 12.9 -6.4
RS Global Natural Resources RSNRX 11/5 1.3 -1.4
Mutual Shares MUTHX 11/9 3.2 4.7
STI Classic Small Cap Equity STCEX 11/30 3.6 17.9
Average -4.8 -2.2
Wilshire 5000 Total Market Index -11.8%
*Through Dec. 7, not including dividends
**Year-to-date total returns include dividends
Barker covers personal finance in his Barker Portfolio column for BusinessWeek. His barker.online column appears every Friday, only on BW Online
Edited by Patricia O'Connell