Three Investments to Help You Survive Armageddon
So, let's get this straight: The stock market slid in September, rebounded in October and now it's ... tanking again?
Most recently, the S&P 500 Index fell 2.8 percent yesterday, extending a two-day decline to 5.2 percent. Is it any wonder individual investors are checking out?
Instead, they ought to go with a time-tested mutual fund, one that's highly rated by industry analysts, charges a minimal amount in fees, posts consistent returns and employs a manager with a skill for stock-picking. In other words, funds that can survive the European debt crisis, a slowdown in emerging markets, a deteriorating U.S. economy. Maybe even Armageddon.
S&P Capital IQ cites three mutual funds, each with a different market focus, that gets the job done. In a way, it's the return of buy-and-hold, except it's with mutual funds, not stocks.
Here are S&P's picks and a sampling of their top holdings:
The $6.8 billion Wells Fargo Advantage Growth Fund is up 11.4 percent from January through the end of October. The S&P 500, in contrast, is little changed this year.
The Wells Fargo Advantage Growth Fund has a five-year average annual return of 10 percent, including 24 percent a year over the past three years. It's in the top 1 percent of its fund peers in terms of performance over the past year, five-year and 10-year periods, and its annual portfolio turnover rate of about 54 percent is well below average.
Advantage Growth has an all-cap mandate, but its portfolio primarily consists of a mixture of large-cap information-technology, consumer-discretionary, health-care, and energy stocks.
The ubiquitous maker of iPad and iPhones, Apple, is the fund's largest holding, at 6.6 percent of the portfolio. Three other picks follow, with the fund's performance listed below:
Whole Foods Market , the fund's second-largest holding at 2.8 percent, is the biggest U.S. retailer of natural and organic foods. It operates about 300 stores in three countries. Comparable-store sales growth was 7.1 percent in the most recent fiscal year, and operating margins improved by 1.4 percentage points. Its shares are up 43 percent this year.
Alexion Pharmaceuticals, at 2.5 percent of the fund, has been a big winner, gaining 68 percent this year. It is a developer of drugs for life-threatening medical conditions and for now, its sole product is Soliris, used to treat a rare blood disorder.
Carmax, sells, finances and services used and new cars through a chain of over 100 retail stores. The fund is the company's seventh-largest investor. Its shares are down 5.7 percent this year, but over three years it has an average annual return of 42 percent and over 10 years, its return is a sterling 12.4 percent annually.
The $437 million Artisan Small Cap Fund , a small-cap growth fund, is up 9 percent this year, which ranks it in the top 2 percent of its peers. Over three years, it has a 21 percent annual rate of return, which ranks it in the top 12 percent. Artisan takes a long-term approach to investing than many of its small-cap peers, as indicated by its relatively modest portfolio turnover rate of 63 percent. Its recent focus has been on information technology, industrial and health care. They include:
Cepheid is the fund's largest holding at 4.6 percent. Its shares are up 58 percent this year. The company has a 10-year average annual return of 19 percent. The systems the company makes perform genetic analysis of DNA and RNA, and enable rapid genetic testing of organisms by automating otherwise complex manual laboratory procedures.
Ulta Salon Cosmetics & Fragrances has almost doubled this year and has a three-year average annual return of 97 percent. It is the fifth-largest holding at 3 percent of the fund. The company is a beauty-care retailer with more than 400 stores in 40 states. Ulta sells items ranging from mass-channel brands to high-end prestige labels.
Regeneron Pharmaceuticals shares are up 68 percent this year, 112 percent over the past 12 months and have an average annual return of 22 percent over five years. The company is involved in the development of drugs used to fight inflammation, cancer and eye disease. The company has one product on the market and several others in various stages of development.
FBR Gas Utility Index Fund is a $426 million sector-focused fund. It's in the top 1 percent of its fund peer group, in terms of performance, this year and over one, three and five years. It has a return of 20.8 percent this year and a 15-year average annual return of 9.3 percent. S&P says it also has a below-average net expense ratio.
Enbridge is the largest holding in the fund at 5 percent. Its shares are up 25 percent this year, and it has a 10-year average annual return of 14 percent. The company operates a network of energy assets that transport and store oil and natural gas throughout North America, which includes one of the continent's largest crude-oil pipelines.
Williams Cos. is the fund's second-biggest holding, also at 5 percent of the portfolio. Its shares are up 24 percent this year, and it has a three-average annual return of 15 percent.
The company is an integrated oil and gas exploration, development and production firm with plans to split off its exploration and production unit via a 20 percent IPO this year and a tax-free spin-off of the rest in 2012.
Oneok is the fund's No. 7 position at 4.7 percent of the portfolio. Its shares are up 40 percent this year, and it has a 10-year average annual return of 18 percent. The company processes, stores, transports, and distributes natural gas and natural-gas liquids across the country.
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