|
Small is beautiful
|
 |
August 7, 2000: 4:28 p.m. ET
Mutual funds with small-caps lead domestic stock funds this year
By Odyll Santos
|
CHICAGO (morningstar.com) - So far this year, small-value and small-blend categories of mutual funds have led domestic stock funds, while the large-value and large-blend groups are dead last with losses.
Returns for the small-blend and small-value categories were nearly the same at about 6.8 percent as of August 3, according to Morningstar's database. At the opposite end, the large-value category slipped 0.6 percent and the large-blend was off 0.5 percent.
While large-blend funds are struggling this year, they have posted decent returns longer term. The category has a 3-year return of 14.4 percent, above the 3-year returns of 7.6 percent for small-blend funds and 2.4 percent for small-value funds. The large-value category had a three-year return of about 7 percent.
The small-blend and small-value funds have profited this year from holdings in smaller-cap energy stocks, said Morningstar.com analyst Scott Cooley.
PBHG Small Cap Value counts energy among its top investment sectors, which also include technology and financials. The fund, which this year gained 24.6 percent through August 3, dedicates 18.1 percent of assets to small-cap energy stocks and has reaped the benefits.
Holdings such as oil and natural gas well operators Santa Fe Snyder (SFS: Research, Estimates) and EOG Resources (EOG: Research, Estimates), and petroleum company Kinder Morgan (KMI: Research, Estimates) have posted sizable gains since the beginning of the year.
Real estate investments, such as REITs, holdings in the insurance industry and other financial stocks also have yielded good returns so far this year.
Goldman Sachs Small Cap Value (GSSMX: Research, Estimates), which has risen about 19 percent since January, puts about 27 percent of its assets in financials, its largest stock sector. Zenith National Insurance (ZNT: Research, Estimates), one of its top holdings, have provided decent year-to-date returns, while securities firm Blackrock has soared about 95 percent. The fund also owns stock in property development firm Catellus Development (CDX: Research, Estimates), which has made respectable gains.
Large-cap funds, however, haven't seen some of their key stock picks rally. Cooley noted "considerable weakness" among widely held stocks, such as Procter & Gamble (PG: Research, Estimates), which issued a major earnings warning earlier this year that hurt many value and blend funds.
For example, Lexington Corporate Leaders (LEXCX: Research, Estimates) puts nearly 4 percent of its assets in the consumer-products giant, whose stock has fallen 46.3 percent since the beginning of the year. That decline, combined with several other underperforming stocks that make up a significant chunk of assets, have pressured the fund. It is down 7.6 percent since January, though its long-term record remains strong.
Large-cap retailers such as Gap (GPS: Research, Estimates) also have seen significant declines, lowering returns for some large-cap funds. While TransAmerica Premier Value (TPVIX: Research, Estimates) saw some of its technology and services stocks rise, its retail stocks, including Gap, fell. Gap, which makes up 3.5 percent of the fund's assets, has declined 34 percent year-to-date. 
-- Odyll Santos is a reporter with Morningstar.com. She welcomes e-mail but cannot give investment advice. She can be reached at mailto:Odyll.Santos@morningstar.com.
|
|
|
|
|
 |
|
