The market is down this year so far, despite its on-and-off rally. But diversified stock mutual funds that are in positive territory for 2022 are still finding winners.
And their methods are also a good way to look for leading stocks. Many have traits that IBD readers recognize.
What types of funds are having a good year? This year it paid to look beyond growth-oriented stock mutual funds. Funds that have weathered the storm best have been, in general, value-oriented. Large-cap, multicap, midcap and small-cap value funds, as groups, have come close to break-even while the broad market in the form of the S&P 500 was down nearly 5%, according to the latest weekly fund data from Refinitiv Lipper.
Mutual Funds That Are Outperforming
So how are those types of funds investing? What sorts of stocks are aiding their performances? Many sport strong CAN SLIM traits.
Energy stocks are the main fuel of mutual funds that are outperforming.
Oil and gas explorers and producers like Marathon Oil, PDC Energy and Range Resources are widely held. So are field services and product providers like Halliburton. And so is energy engineering services provider KBR.
Their year-to-date gains range from 14% by KBR to 72% for Range Resources, going into Thursday.
But what else has provided oomph to stronger mutual funds so far this year? If high-octane stocks in the easy-to-guess energy sector have been big helps to better-performing mutual funds, what other stocks have provided strength?
Look Who Owns Berkshire Hathaway
The $891.2 million Voya Corporate Leaders Trust Fund (LEXCX) is up 12.42% so far this year. That's best among large-cap value mutual funds. Class-B shares in Berkshire Hathaway are a holding.
Berkshire is up 19.6%. It has an IBD Composite Rating of 92.
A Composite Rating of 92 means that a stock is in the top 8% of all stocks on a number of technical and fundamental factors, including both price performance and earnings. Watch for stocks that have 90-plus Composite Ratings and are forming bases or are in follow-on buy areas. That way, you spot the best-positioned stocks before they start big price runs. Look up a stock's Composite Rating at IBD Stock Checkup.
In addition, Berkshire has an IBD SMR Rating of C (which measures Sales, profit Margins and Return on equity) on a scale of A through E. The stock scores in the top 60% of all stocks based on those gauges.
Berkshire is a holding company that is at the heart of legendary investor Warren Buffett's investment empire. The conglomerate includes insurer Geico, underwear maker Fruit of the Loom, battery maker Duracell and ice-cream and fast-food chain Dairy Queen.
Recently, Berkshire has been guzzling shares of Occidental Petroleum. It also has stakes in Apple and Coca-Cola.
Allison Transmission In High Gear
The $525 million Hotchkis & Wiley Mid-Cap Value Fund (HWMIX) is the top performer so far this year among midcap value funds thanks to an 10.77% gain.
Among the fund's top-performing nonenergy holdings are commercial-duty transmissions maker Allison Transmission and insurer and annuity provider American International Group.
Allison, which is up 11.36%, has a Comp Rating of 91. Its SMR Rating is A. Its dividend yield is 2.1%.
Allison's earnings per share grew 405%, 31% and 117% the past three quarters. Those followed five quarters of declining EPS.
EPS are expected to grow 24% this year and 20%, according to analysis by MarketSmith.
AIG stock is up 12.22%. Its Comp Rating is 94. It has an SMR Rating of C. Its dividend yield is 2.0%.
Leading Small-Cap Stocks
The $256.67 million Aegis Value Fund (AVALX) is the top performer among small-cap value mutual funds so far this year. Its year-to-date gain is 19.05%.
Energy is its second biggest sector weighting, at 23%. It trails basic materials at 71%.
Among holdings that do not have an energy tie-in, Mercer International manufactures northern bleached softwood kraft pulp. It is in the basic materials group. Investors tend to regard basic materials as a way to keep pace with inflation.
Mercer's earnings per share grew at a triple-digit pace the past four quarters: 280%, 346%, 845% and 660%. Still, Market Smith forecasts a 6% slowdown this year and 26% lower profit the year after.
Its dividend yield is 2.1%. Mercer's Comp Rating is 94. Its SMR Rating is B.
Equinox Gold is another holding that's seen as an inflation hedge. Equinox looks for and mines gold in the U.S. It's up 22.19% this year.
After EPS jumped to $1.69 in 2021, MarketSmith predicts a pullback to 38 cents per share this year.
Equinox's Comp Rating is 92. Its SMR Rating is A.
Follow Paul Katzeff on Twitter at @IBD_PKatzeff for tips about retirement planning and actively run portfolios that consistently outperform and rank among the best mutual funds.
