Diversified funds worth keeping

Surveying the wreckage of the mutual fund industry this year, a few funds have survived remarkably intact, and a few might even be worth investing in.

The bear market has toppled many of the mightiest funds: The Growth Fund of America, the largest mutual fund in the galaxy, is down 35 percent this year; the Vanguard 500 fund, down 33.9 percent; Fidelity Magellan, down 46 percent.

But a tiny handful of diversified funds have managed to fall less than 10 percent – and a few have even eked out gains.

The top two funds, Comstock Capital Value and the Prudent Bear funds, aren’t bear funds per se, because they can bet on a market rise, if they choose to. Nevertheless, they are run by longtime, perennially bearish managers.

Comstock Capital Value has lost an average of 0.49 percent a year since its inception, according to Morningstar, the Chicago mutual fund trackers. Nevertheless, the fund’s 47 percent gain this year deserves noting. Its largest holding is a bet against the Standard & Poor’s 500-stock index.

Similarly, the Prudent Bear fund has been hating on the stock market for more than a decade. The fund has huge amounts of money market securities, or cash, in its portfolio, as well as a smattering of gold-mining stocks. What the fund earns in bear markets, however, it loses in bull markets: It’s virtually unchanged since its inception.

Two similar funds, the Merger Fund and Gabelli ABC fund, have also fared well in the downturn. That’s because the funds hold staggering amounts of cash – 31 percent in the case of Merger and 61 percent in the case of Gabelli.

A few diversified funds deserve special mention, however:

•Forester Value (ticker: FVALX) has eked out a 2.9 percent gain through October. The fund couldn’t find many stocks cheap enough to meet its criteria – at least until recently. Forester Value has gained 28 percent the past five years.

•Hussman Strategic Growth (HSGFX) looks for stocks that are cheap relative to earnings, but also looks at overall market action when it buys stocks. It’s down 1.2 percent this year and up 23 percent the past five years.

•Heartland Value Plus (HRVIX), another long-tem value fund, is down 11.1 percent this year, but it will be a good fund to own when the market turns around. It’s up 40 percent the past five years.