Mutual Fund Managers' Stupid Year

The smart money doubted Apple this year. Oops. The company’s shares rose 33 percent through Dec. 16—almost five times the Standard & Poor’s 500-stock index’s 6.7 percent. “It’s been a really confusing year,” says Kim Forrest, an analyst at Fort Pitt Capital Group in Pittsburgh. “There have just been a handful of stocks that drove the market, and Apple was obviously one of them.”

Shunning the iPhone maker is turning out to be one of the worst blunders in 2014 for mutual fund managers, who are trailing their benchmark indexes by the most in almost a decade. Investors who clung to winners from the first five years of the bull market—such as Internet companies and small stocks—got burned in the sixth as chipmakers, utilities, and high-dividend stocks rallied. Last year proved a particularly poor blueprint for this one. Apple rose 5.4 percent in 2013, its second-worst return in a decade, while Amazon.com rose 59 percent and Twitter more than doubled after going public. Those two are down 26 percent and 45 percent, respectively, in 2014.