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February was a volatile month for mutual-fund investors. Stocks, which had rallied in the first two weeks of the New Year before falling sharply in the second half of January, continued their descent in early February. Hopes that a conflict with Iraq would start -- and end -- soon and bolster the economic recovery lifted stock-fund returns mid-month. But investors' enthusiasm soon petered out, and selling resumed. By the end of February, the average U.S. diversified stock fund had lost 2%, faring a bit worse than the S&P 500, which fell 1.5%.
A few market niches benefited despite -- or in some cases because of -- war jitters, and funds that focused on them held up the best in February. The best-performing fund category in BusinessWeek's Mutual Fund Scoreboard was natural resources, gaining an average of 2.8% in February, thanks to the rise in oil and commodity prices. Oppenheimer Real Asset (QRAAX
) was up 12.3% for the month and has climbed 54% in the past 12 months, making it the top-performing stock fund over that time period.
A few Russia funds, which tend to be heavily weighted in energy stocks, turned in strong performances. ING Russia (LETRX
) gained 10.4%, and Third Millennium Russia (TMRFX
) gained 9.8% in February. Fidelity Select Energy Service (FSESX
) was also a top-performer, gaining 6.4% in the month.
BARGAIN HUNTING. Technology continued its surprising pattern this year of outperforming broader indexes as some brave investors picked up bargains and positioned their portfolios for an eventual rebound in business spending. Tech funds gained 0.4% in February. The month's best performer was a souped-up bet on chipmaking: ProFunds Ultra Semiconductor (SMPIX
) climbed 13.8%.
Funds that invest in small companies fared among the worst, with both growth and value small-cap funds losing 3.2% in the month. Perkins Opportunity (POFDX
), a small-cap growth fund, was the worst-performing equity fund in February, with a loss of 19%. Among large-cap names, growth did a bit better than value. For example, Large-cap growth funds lost 0.9% in the month, while large-cap value funds lost 2.5%.
Many funds that invest in Europe were hurt badly as deteriorating economic news there cast a pall on stocks. Among the worst performers in February were iShares MSCI Belgium Index (EWK
), which fell 10.5%, and iShares MSCI Netherlands Index (EWN
), which fell 9.9%.
WORLD-BEATING BONDS. On the fixed-income side, volatile emerging-market bond funds did the best, gaining 3.5% in the month as economic turmoil in Latin America cooled, at least temporarily, and Asian tech markets showed strength (see BW Online, 3/04/03, "Special Report: Emerging Tech Markets").
Most bond funds had positive returns in February. Only convertible-bond funds, which are linked to equity results, fell 0.3% in the month. Investors who stuck to the safety of long government bond funds were rewarded yet again as that category turned in another strong month. American Century Target Maturity 2025 (BTTRX
) was the top-performing bond fund in February, climbing 5.2%. The average long government bond fund gained 2.4% in February. With a 13.3% 12-month return, trusty old government bonds are proving themselves the asset class to beat in 2003.
A-rated equity funds in February
ABN AMRO Real Estate N
AIM Global Health Care A
ARK Small Cap Equity A
Advisors Inner Circle FMC Select
Amer Century Equity Inc Inv
Amer Century Glbl Gold Inv
Ariel
Armada Small Cap Value I
Artisan Mid Cap
Artisan Small Cap Value
BNY Hamilton Sm Cap Gr Inv
Baron Growth
Berger Small Cap Value Inv
Berwyn Income
Bjurman Micro Cap Growth
BlackRock International Opportunities Inv A
Brazos Micro Cap Y
Bridgeway Aggressive Investors 1
Bridgeway Ultra Small Company
Bridgeway Ultra Small Company Tax Adv
Bruce
CGM Focus
Calamos Growth A
Clipper
Conseco Balanced C
Conseco Equity Y
Dodge & Cox Balanced
Dodge & Cox Stock
Driehaus Asia Pacific Growth
Eaton Vance Wldwd Hlth Sciences A
Emerald Select Banking & Finance A
Evergreen Precious Metals Holdings A
Exeter Pro Blend Conservative Term A
FBR Small Cap Financial A
FBR Small Cap Value A
FMI Focus
Fenimore Equity Income
Fidelity Advisor Mid Cap T
Fidelity Export & Multinational
Fidelity Fifty
Fidelity Japan Small Co
Fidelity Low Priced Stock
Fidelity New Millennium
Fidelity Real Estate Investment
Fidelity Select Gold
Fidelity Select Insurance
Fidelity Select Natural Gas
Fidelity Select Software & Computer
Fifth Third Micro Cap Value Instl
Fifth Third Strategic Income Instl
First American Real Estate Securities Y
First American Small Cap Growth Opport Y
First Eagle Global A
First Eagle Overseas A
First EagleGold
First Investors Multi-State Ins Tax Free NC A
Franklin Gold & Precious Metals A
Franklin Microcap Value
Fremont US Micro Cap
Fremont US Micro Cap Instl
Gabelli ABC
Gabelli Gold
Hartford Mid Cap A
Hennessy Cornerstone Growth
Heritage Mid Cap Stock A
Hotchkis & Wiley Mid-Cap Value I
ICON Energy
ICON Healthcare
ICON Information Technology
ICON Leisure and Consumer
IMS Capital Value
ING Index Plus Mid Cap A
ING Precious Metals
INVESCO Energy Inv
INVESCO Leisure Inv
JPMorgan Mid Cap Value I
Janus Adviser Balanced I
Janus Adviser Capital Appreciation I
Janus Balanced
Jensen
Julius Baer International Equity A
Kinetics Internet
Leuthold Core Investment
Liberty Acorn Z
Longleaf Partners
Lord Abbett Mid Cap Value A
MFS International New Discovery A
Mairs & Power Growth
Marshall Mid Cap Value Inv
Matthews Asian Growth & Income
Matthews Korea
Merger
Meridian Growth
Meridian Value
Merrill Lynch Global Small Cap B
Merrill Lynch Healthcare B
Merrill Lynch Natural Resources D
Monterey OCM Gold
Montgomery Partners Long Short Eqty Plus R
Morgan Stanley Health Sciences Trust B
Morgan Stanley Instl Small Company Gr B
Mosaic Equity Tr Mid Cap
Mutual European Z
Mutual Financial Services A
Navellier Perf Mid Cap Growth
Needham Growth
Neuberger Berman Genesis Inv
Oakmark Equity & Income I
Oakmark International Small Cap I
Olstein Financial Alert C
Oppenheimer Gold & Special Minerals A
Osterweis
PBHG Mid Cap Value
PIMCO RCM Biotechnology D
PIMCO RCM Global Healthcare D
Parnassus Income Equity Income
Permanent
Phoenix-Duff & Phelps Real Estate Sec A
Prudent Bear
Prudential Natural Resources A
Quaker Aggressive Growth A
Reserve Private Eqty Small Cap Growth R
Royce Low Priced Stock
Royce Opportunity Inv
Royce Pennsylvania Mutual Inv
Royce Premier
Royce Total Return
Royce Trust & Giftshares Inv
Rydex URSA
Schroder Capital Ultra Inv
Scudder Gold & Precious Metals S
Scudder Micro Cap Invest
Scudder Target 2010
Security Capital US Real Estate
Security Mid Cap Value A
Sentinel Small Company A
Smith Barney Aggressive Growth A
Stratton Monthly Dividend REIT
Strong Advisor Small Cap Value Z
T Rowe Price Capital Appreciation
T Rowe Price Health Sciences
T Rowe Price Intl Discovery
T Rowe Price Real Estate
TCW Galileo Value Opportunities I
Thompson Plumb Balanced
Thompson Plumb Growth
Tocqueville Small Cap Value
Touchstone Emerging Growth A
Transamerica Premier Growth Oppt Inv
Turner Micro Cap Growth
USAA Precious Metals & Minerals
Undiscovered Managers REIT Instl
Undiscovered Managers Small Cap Vl Instl
Value Line Emerging Opportunities
Vanguard Capital Opportunity
Vanguard Energy
Vanguard Health Care
Vanguard International Explorer
Vanguard LifeStrategy Income
Vanguard Precious Metals
Vanguard Wellesley Income Inv
WM West Coast Equity A
Waddell & Reed Adv Asset Strategy A
Waddell & Reed Adv Science & Technology A
Wasatch Core Growth
Wasatch Micro Cap
Wasatch Small Cap Growth
Wasatch Small Cap Value
Wasatch Ultra Growth
Weitz Partners Value
Weitz Value
Wells Fargo Strategic Income I
Westport R
Westport Select Cap R
William Blair International Growth N
Stone is an associate editor of BusinessWeek Online and covers the markets as a Street Wise columnist and mutual funds in her Mutual Funds Maven column Edited by Patricia O'Connell
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