Harry Domash's Winning Investing

Best Mutual Funds Unlikely to Disappoint

It’s time for my annual look at “what’s hot” in the mutual fund world. Here’s a list of the five mutual funds that have the S&P 500 returns over the past 12-months, and have also beat the S&P’s returns over the past three and five years.

Specifically, qualifying funds must have returned 33% over the past year, and averaged 10% and 16% annual returns, respectively, over the past three and five years. Also, passing funds must be no-load, meaning that you pay no sales commissions, and they must require no higher than a $2,500 minimum initial purchase.

It probably isn’t a big surprise to you that four of the five are tech funds.

Fidelity Select Semiconductor (FSELX): Holds 43 mostly U.S.-based semiconductor chipmakers, but its top three holdings, Intel, Qualcomm, and Broadcom, comprise almost half (48%) of the portfolio. FSELX returned 46% over 12-months, and 22% and 25%, on average, annually, over three and five years. The fund turns over its entire portfolio and then some annually (110% annual turnover).

Fidelity Select Technology (FSPTX): Holds a diversified portfolio of 145 tech stocks, about 70% U.S.-based, and most of the balance in Asia. Biggest holdings include Apple, Facebook , and Alphabet (Google). Apple has been in the portfolio for 15 years and Alphabet for nine years. Even so, it turns over 82% of its portfolio annually.  Select Technology returned 46% over the past year, and averaged 19% and 20% annually over three and five years.

Rydex Electronics Fund Class Investor (RYSIX): Annual portfolio turnover is an astounding 769%. Thus, its top holdings list as of April 30 is hopelessly out of date.  For what it’s worth, at that date, Rydex held 53 stocks, almost all chipmakers. Biggest holdings were Intel, Broadcom and Texas Instruments. Rydex returned 45% over the 12-months, and averaged 19% and 21% annually over three and five years.

Tarkio Fund (TARKX): This unusual fund picks stocks based its perception of a firm’s management culture, specifically integrity, passion and purpose, long-term focus, teamwork, employee empowerment, and disciplined capital allocation. Tarkio follows a classic “buy and hold” strategy (12% annual turnover). In fact, 16 of its top 25 holdings have been in the portfolio since the fund’s inception in 2011. Its total portfolio holds only 34 U.S. based mostly mid- and small-cap stocks. Biggest holdings include Cognex, Whole Foods, and Level 3 Communications. Tarkio returned 34% over the past year, and averaged 13% and 18%, annually, over three and five years.

Fidelity OTC (FOCPX): Holds NASDAQ listed and over-the-counter (OTC) traded stocks. Its widely diversified 210 stock portfolio holds mostly large-caps. Biggest holdings include Tesla, Apple, Alphabet, and Amazon. Although annual turnover is 56%, both Apple and Alphabet were first added 12 years ago, while Amazon was added in 2007 and Tesla in 2010. Fidelity OTC returned 33% over the past year, and averaged 17% and 21% annually over three and five years.

All performance data courtesy of Morningstar (www.morningstar.com).

As always, past performance doesn’t predict the future. Formerly successful stock picking strategies can fall flat when market conditions change.

Published 6/12/17

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