observations from an ugly day in the market (08/03/11)

David_Snowball

Couldn't quite manage a "top ten" list but . . .

1. Birds of a feather fell together: A number of fund families clustered at the top (or bottom) of the one-day returns. The Fairholme's suffered across the board – Fairholme Allocation (FAAFX) and Fairholme Focused Income (FOCIX) were at the bottoms of their respective peer groups while Fairholme (FAIRX) was merely "well below average." Likewise with Templeton's global bond lineup (Global Bond, International Bond, Global Total Return) and the Driehaus income funds (Active Income and Select Credit) were uniformly trashed.

2. On the flip side, Hussman Strategic Total Return (HSTRX), Strategic Growth (HSGFX) and Strategic International (HSIEX) all topped their respective groups.

3. Mr. Gundlach & co. had a string of strong performances with DoubleLine Emerging Markets Fixed Income (DBLEX), RiverNorth Doubleline Strategic Income (RNSIX), and ASTON/DoubleLine Core Plus Fixed Income (ADLIX) all posting top 10 results. All of the DoubleLine funds (include Core Fixed Income, Total Return and Multi-Asset Growth) were in the black, with gains of 0.35 - 0.70%.

4. RiverPark Short Term High Yield (RPHYX) ignored the market again. NAV dropped a penny (0.1%), which is a fairly common fluctuation for the fund. It finished in the top 10 high yield funds.

5. Eric Cinnamond's Aston / River Road Independent Value (ARIVX) was one of the top five small-value funds, along with cash-heavy Pinnacle Value (PVFIX), Queens Road Small Cap Value (QRSVX) and his former fund, Intrepid Small Cap (ICMAX). The Observer has profiled all of them as solid, conservative choices.

6. Frontier markets paid less attention to the turmoil than did emerging markets. Of the 10 best-performing emerging markets funds, eight were explicitly "frontier" funds or e.m. small caps.

7. Matthews dominated Asia: almost all of the Matthews funds finished in the top ten. Those include Asia Dividend, Asia Growth, Asian Growth & Income, Asia Small Companies, India, Pacific Tiger and Japan. Of them all, Asia Dividend had the smallest loss, down 0.55% They also represent three of the 10 best international funds of any variety.

8. Fidelity Leveraged Company Stock (FLVCX) reminded me of why its investors rarely make money; the fund dropped over 4% for one of the day's worst showings.

9. I don't know what the First Trust Value Line Target 25 (no ticker) is supposed to do, but I'm betting that dropping 7% in a day – the worst performance of any unleveraged fund and the second worst among all funds – won't help it.

Kenster1_GlobalValue

Global bond fund GIM did great going up in yesterday's big down day.

RNDLX is also up nicely YTD at +8.48%.

AndyJ

Not to rain too hard on Mr. Hussman's parade today, but since he's let Hstrx become almost entirely a short-intermediate Treasury fund, with just a tiny smattering of his "allocation" allowables, it's now behind the simplest of intermediate T-funds, Vanguard's Vfitx, for most of the commonly reported periods since Hstrx's inception. The latter part of '09 was the last time Hstrx really operated as a semi-flexible, fully functioning yet conservative allocation fund, and it was also the last time he had a leg up on Vfitx.

M*'s stock-holding boundary between a bond fund and a conservative allocation fund is 20%, and it's been a while since Hstrx had that much in stocks. It probably should be compared against intermediate bond funds nowadays, actually intermediate government funds, and, sorry to say, it looks pretty weak on that basis.

MikeM

Reply to @AndyJ:

Can't really agree with you Andy. If you were to change the comparison benchmark every time Hussman shifts his allocation, you could always make a case his fund falls behind in short-term results. What I like about this fund is it's volatility is very low and it's returns are very consistent - over time. The stockcharts attachment below shows HSRTX doing much better than VFITX in the long run.

http://stockcharts.com/freecharts/perf.html?vfitx,hstrx

Hussman runs this fund very conservatively, and steers the ship with very little volatility. Is it a bond fund? Is it a conservative allocation fund? Probably sways between the two as the market cycles. I actually use it as a pseudo bond fund in my portfolio with the expectations of steady 5-7% returns and volitilty as low as most intermediate bond funds over time. Fits well with those expectations.

A side note to that. I wouldn't hold his stock fund, HSGFX. It's tough (for me) to wait out years of underperformance. HIs stock direction calls are ussually "way" to early.

AndyJ

Hi Mike, point is he's quit making meaningful allocations to the non-Treasury, non-cash-equivalent holdings.

I don't know about stockcharts - I remember someone saying they're charted on price alone. Try M*, which is where I got the info for my comment, and which for sure factors in total return both on the "chart" and "performance" pages. Vfitx beats Hstrx on both 3y and 5y returns. Earlier, Hstrx did better, reflecting, imho, the same story as Hsgfx; he paid more attention to managing the fund in its earlier days.

If he had made the reallocations that his "market action" factor suggested in the past several years, especially in the last two, holders of Hstrx would have a lot more $ now.

I'm with the crowd that thinks Hstrx has a great strategy, if only the manager would use it. I held it, and liked and recommended it, until he stopped using the strategy. I replaced it with Pimco TR and haven't looked back.

Best,
AJ