Almost 100 mutual funds that hold a mix of U.S. stocks are losing money for investors this year even as benchmark indexes have recorded double-digit gains.
About 5 percent of diversified domestic stock funds, or 97 of 1,961 funds, declined in the first half of the year, according to researchers at Morningstar Inc. The proportion of falling funds is lower than for all of 1998, when 334, or 19 percent, of 1,776 U.S. stock funds fell.
"The overall market is having a good year, but there are pockets such as tobacco, housing, and some financial and retail stocks that have been really crummy," said Russel Kinnel, an analyst at Morningstar, a Chicago-based research firm that rates funds.
The worst recent year for investors in U.S. stock funds was 1994. About 60 percent of all diversified U.S. stock funds fell that year, according to Morningstar, while the Standard & Poor's 500-stock index gained 1.3 percent. This year the S&P 500, the benchmark for large-cap stocks, rose 10.4 percent through Friday.
The numbers were far more favorable in the 1995-1997 period. In 1995, just six of 1,640 diversified U.S. stock funds recorded losses, Morningstar reported. The results also were stellar in 1996, when 14 funds declined, and 1997, when 52 funds lost ground.
This year's laggards include funds such as Yacktman Focused, which were hurt by declines in a handful of stocks, and others such as ProFunds Ultra OTC, which are designed to succeed only when the market is falling.
Yacktman Focused has been battered by investments in Department 56 Inc., the maker of "Snowbabies" collectible figures, and Philip Morris Cos., the world's largest tobacco company, Kinnel said. The $15 million fund was down 8.78 percent as of Thursday.
Then there's the $950 million Strong Schafer Value Fund, down 7.54 percent. The fund, run by David Schafer since it opened in 1985, has been hurt by holdings in stocks such as Diebold Inc., the largest U.S. maker of automated teller machines, and Avnet Inc., one of the world's biggest computer-parts distributors.
Another widely held fund, Safeco Growth, was down 6.35 percent this year, as of Thursday. The fund, managed by Thomas Maguire for the past 10 years, has about 70 percent of assets in shares of smaller companies.
The $1.05 billion Safeco Growth Fund has rebounded since late March, when it was down as much as 11.2 percent. The fund's biggest holdings recently included Nu Skin Enterprises Inc., a maker of skin-care and nutrition products, and United Stationers Inc., North America's largest wholesale distributor of office goods, both of which have declined this year.
Safeco Growth is trailing in a year when the Russell 2000 index--the benchmark for small-cap stocks--was up 6.3 percent at Friday's close.
The $5 billion Sequoia Fund, which has been shut to new investors since 1982, was down 3.78 percent as of Thursday. This would mark the first year since 1990--if the trend continues--that Sequoia Fund loses money for investors.
Sequoia is being hurt by investments in several financial-related stocks, including Freddie Mac, Progressive Corp. and Fifth Third Bancorp, Morningstar's Kinnel said.
By contrast, some of America's biggest funds, including Fidelity Magellan, are in positive territory, with returns exceeding the S&P 500. These funds tend to invest in shares of larger companies.
The $100 billion Fidelity Magellan Fund, the world's largest mutual fund, was up 12.5 percent at Thursday's close. Other winners were Janus Fund, up 18.28 percent, and American Century Ultra Investors, up 11.82 percent.