After a Miserable Year, We Substitute Five New Funds

Mutual Funds

After a Miserable Year, We Substitute Five New Funds

The past year has been nothing short of catastrophic for funds of nearly all stripes. Almost every market crashed. Over the past year through March 6, Standard & Poor's 500-stock index surrendered 46%. The Russell 2000 index of small companies plummeted by the same amount, and the beleaguered MSCI EAFE index, which tracks foreign stocks, lost 53%.

The 15 domestic stock funds in the Kiplinger 25 performed even worse than the index, losing 51%, on average. Our foreign funds plunged by 55%, on average. Our five bond funds lost an average of 6%.

All three of our recommended portfolios took a thrashing. The long-term (and most aggressive) portfolio shed 54%, hurt by a substantial weighting in foreign stocks and disastrous domestic performers, such as CGM Focus. The short-term package was the most conservative, but it wasn't conservative enough. Despite a 40% weighting in bonds, it lost 34%. The medium-term portfolio surrendered 41%.

We have made five switches in this year's Kiplinger 25. We bid farewell to Bill Miller's Legg Mason Opportunity, which has performed dreadfully (and charges high fees), even compared with the sorry results of the index. We replaced Miller's fund with FPA Crescent (FPACX), managed by Steve Romick, a shrewd value investor who, like Miller, is able to sell short stocks that he believes are overpriced. At last report, Crescent had about one-fourth of its assets in bonds. Romick also had 5% of the fund's assets in stocks sold short.


We dropped Bridgeway Aggressive Investors II because of a lack of transparency in its purely quantitative investment methodology. We let loose Marsico 21st Century but retained Marsico Global; the funds have some overlap in their holdings. We also let go Kinetics Paradigm, an idiosyncratic fund whose recent returns have not justified its stiff fees.

We dropped T. Rowe Price Growth Stock, a perfectly respectable fund, and replaced it with the recently reopened Fidelity Contrafund (FCNTX). Contra, a large-company growth fund, has an outstanding record under its long-tenured manager, Will Danoff.

In a similar vein, we're happy to add three other recently reopened funds (one of the few benefits of this brutal bear market is that many excellent funds that had closed their doors have resumed accepting money from new investors). Fidelity Low-Priced Stock (FLPSX), which holds an enormous portfolio of mostly small and midsize companies, has been expertly run since 1989 by the redoubtable Joel Tillinghast.

We also jumped at the chance to add two fine T. Rowe Price funds to our list. Both are managed by long-tenured, steady managers: Preston Athey runs Small-Cap Value (PRSVX), and Brian Berghuis pilots Mid-Cap Growth (RPMGX).



Legg Mason Opportunity
Bridgeway Aggressive Investors II
Marsico 21st Century
Kinetics Paradigm
T. Rowe Price Growth Stock


FPA Crescent
Fidelity Contrafund
Fidelity Low-Priced Stock
T. Rowe Price Small-Cap Value
T. Rowe Price Mid-Cap Growth

SEE ALL the Kiplinger 25 funds