A Steady Quarter
Small-company stocks lead the way
Despite a late February sell-off, stock funds still managed to post generally positive returns in the first quarter. While the Dow Jones industrial average fell 0.4 percent and the Nasdaq was down 0.5 percent in the period ended March 31, the average domestic equity fund returned 3.2 percent, according to fund tracker Morningstar.
Whenever domestic equity funds beat the major indexes, it typically means small stocks are beating the blue chips, since those stocks dominate most indexes. True to form, small caps led in the first quarter, continuing a three-year rally. The average small-cap fund returned 5.2 percent, versus 4.3 percent for the average midcap fund and 1.4 percent for large-cap funds. Small-cap value funds did very well, with returns of 6 percent in the quarter. "Small-cap value funds have really been the best place to be in the last 3 1/2 years," says Russel Kinnel, Morningstar's director of mutual fund research.
Among sector funds, technology funds took a slight breather in the first quarter after leading the market in 2003. The average tech fund was up around 1 percent in the first quarter. By comparison, real estate investment trust funds soared 11.9 percent, though they have taken a plunge recently. As energy prices have risen with improving global demand, natural resource funds also have thrived, returning 6.7 percent in the quarter. That rosier global picture also explains why international stock funds have been outperforming domestic stock funds so far this year. The average overseas fund returned 5.2 percent in the quarter. Diversified emerging markets funds did even better, gaining 8.7 percent. And funds that invest in Asia rose an average 10.6 percent.
Quarterly 1-year 3-year Morningstar Phone
FUND return return return category
EMERGING MARKETS
1. Fidelity Emerging Markets 9.99 76.92 16.47 2 800-343-3548
2. T. Rowe Price Emerging Markets Stock 9.63 81.34 17.91 4 800-638-5660
3. SSgA Emerging Markets 9.46 78.78 18.84 4 800-647-7327
4. Legg Mason Emerging Markets Prime 8.16 95.21 19.56 4 800-577-8589
5. Vanguard Emerging Mkts Stock Index 7.85 80.18 18.70 3 800-662-7447
HEALTHCARE
1. Fidelity Select Biotechnology 9.95 39.96 0.01 1 800-343-3548
2. PIMCO RCM Biotechnology D 9.34 50.51 1.87 2 800-426-0107
3. T. Rowe Price Health Sciences 8.62 43.13 10.80 4 800-638-5660
4. Janus Global Life Sciences 7.80 34.64 2.17 3 800-525-8983
5. PIMCO RCM Global Health Care D 7.21 32.53 4.99 3 800-426-0107
INTERMEDIATE-TERM BOND
1. Vanguard Interim-Term Bond Index 3.77 7.67 8.55 5 800-662-7447
2. Summit Bond Fund 3.18 10.56 7.14 4 888-259-7565
3. Payden Core Bond R 3.15 5.90 8.45 4 800-572-9336
4. Vanguard Interim-Term Corp Bd 3.12 7.49 8.37 5 800-662-7447
5. Fremont Bond 2.94 6.25 8.23 5 800-548-4539
LARGE GROWTH
1. Transamerica Premier Focus Inv 7.43 48.85 2.25 3 800-892-7587
2. Reynolds Opportunity 5.00 90.99 1.54 1 800-773-9665
3. Marsico 21st Century 4.48 56.88 12.07 5 888-860-8686
4. Sit Large Cap Growth 4.30 34.13 -4.84 3 800-332-5580
5. Fidelity Capital Appreciation 4.20 65.20 8.81 5 800-343-3548
LARGE VALUE
1. HighMark Large Cap Value Fid 5.82 43.99 0.64 2 800-433-6884
2. Excelsior Value & Restructuring 4.77 60.06 7.53 5 800-446-1012
3. Vanguard Windsor II 4.76 42.29 4.00 4 800-662-7447
4. Masters' Select Value 4.70 49.61 6.64 4 800-960-0188
5. Vanguard U.S. Value 3.91 44.90 6.45 5 800-662-7447
NATURAL RESOURCES
1. Fidelity Select Energy Service 9.84 21.91 -1.26 2 800-343-3548
2. Vanguard Energy 7.45 42.35 12.54 5 800-662-7447
3. Fidelity Select Natural Gas 7.32 35.52 0.69 3 800-343-3548
4. Fidelity Select Energy 6.42 31.01 2.72 4 800-343-3548
5. T. Rowe Price New Era 4.96 43.78 8.94 4 800-638-5660
SMALL GROWTH
1. WPG Tudor 7.89 67.43 8.22 2 800-223-3332
2. T. Rowe Price New Horizons 7.66 63.30 11.34 3 800-638-5660
3. Henlopen 7.66 85.36 19.73 4 866-880-0032
4. Nicholas Limited Edition 7.52 55.00 12.59 3 800-227-5987
5. Baron Small Cap 7.22 48.51 15.74 4 800-992-2766
SMALL VALUE
1. HighMark Small Cap Value Fid 9.29 63.53 17.25 3 800-433-6884
2. Legg Mason U.S.
Small Cap Value Prime 7.64 63.71 17.33 2 800-577-8589
3. Vanguard Small Cap Value Index 7.14 59.73 13.06 2 800-662-7447
4. Oakmark Small Cap I 7.03 46.87 12.31 1 800-625-6275
5. Turner Small Cap Value 6.95 73.31 13.34 3 800-224-6312
TECHNOLOGY
1. Amerindo Technology D 5.58 57.09 8.47 2 888-832-4386
2. Fidelity Select Network
& Infrastructure 5.13 65.10 -9.51 2 800-343-3548
3. RS Internet Age 4.86 96.58 12.94 4 800-766-3863
4. RS Information Age 4.42 88.74 1.00 4 800-766-3863
5. Fidelity Select Software & Comp 3.76 43.60 10.95 4 800-343-3548
*Measures long-term performance against its peers, with 5 being the best.
S&P 500 INDEX 1.69 pct. 35.1 pct. 0.63 pct.
(c) 2004 Morningstar Inc. All Rights Reserved. The mutual fund data: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
This story appears in the May 3, 2004 print edition of U.S. News & World Report.