| Value was the key in October | |
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Monthly Mutuals Analysis
Dateline:
November 16, 2000
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On October 25th, Nortel Networks plunged from $96.10 to $71.55, a drop of 25.5%. And a lot of other stocks were dragged down with it. Small wonder then that a lot of Canada's go go funds went went south south as a result.
Top holdings data as reported at Globefund is to the end of June. At that time Nortel made up a whopping 42.2% of the Transamerica Growsafe Canadian 60 Index Fund. Other fund's Nortel stakes? Acuity Pooled Canadian Equity Fund - 13.1%, NN Life Canadian Communications - 13.1%, Altamira Capital Growth - 12.6%, Transamerica Growsafe Canadian Equity - 11.3%. These funds may have reduced their exposure before Oct. 24th, but all suffered a serious decline in October.
Canadian fund regulations do not allow a fund to invest more than 10% of its money in one stock at the time of purchase, so the Transamerica Growsafe Canadian 60 Index Fund holding of 42.2% represented an early buy that had grown to dominate the fund. Many other funds had a 3% - 10% exposure and suffered accordingly.
Not surprisingly in a month where the tech sector was decimated, value oriented funds shone. Looking at the Top 25 Funds for the month as reported at The Vancouver Sun website, four call themselves value funds. Another six are First Trust Target 10 funds and Merrill Lynch Select 10 funds. These are focused on the ten stocks in the Dow Jones Industrial Average that are paying the highest dividend yield based on the theory that the high yield indicates undervaluation - a value approach. Four others are McLean Budden funds - a company known for its conservative value approach, and two are Investors large cap funds - similar approach.
Here are the Top Ten Funds for October:
| Rank | Fund | Type | 1 Month | 3 Month | 1 Year |
|---|---|---|---|---|---|
| 1 | Friedberg International Securities Fund | Specialty | 17.24% | -1.08% | 18.59% |
| 2 | First Trust Target 10 Trust 1997 Series C$ | Value | 11.29% | 18.06% | -14.03% |
| 3 | First Trust DJIA Target 10 Trust 1999 Series C$ | Value | 11.03% | 16.97% | -5.46% |
| 4 | First Trust DJIA Target 10 Trust 1998 Series C$ | Value | 10.97% | 17.87% | -6.49% |
| 5 | First Trust Target 10 Trust 1996 Series C$ | Value | 9.86% | 16.45% | -14.66% |
| 6 | MD US Tax Managed Pool Fund | US Equity | 8.04% | n/a | n/a |
| 7 | Optima Strategy U.S. Equity Value Pool Fund | Value | 7.64% | 17.51% | 2.67% |
| 8 | Select Ten Fund (Merrill Lynch) | Value | 7.55% | 11.47% | -4.58% |
| 9 | AGF International Value Fund | Value | 7.00% | 15.41% | 34.98% |
| 10 | AGF RSP International Value Fund | Value | 6.48% | 14.58% | n/a |
Power Performers
| Definitions |
| Power
Performers Those mutual funds returning better than 20% for each of the 1 year, 3 year and 5 year periods. |
Super Power
Performers |
Looking at our Power Performers we see that they shrank in number under the weight of Nortel and other tech fallout - 53 funds in September making the cut, but only 40 in October. Nevertheless, 12 still managed to make it to the ranks of the Super Power Performers.
Every single one of the Super Power Performers turned in a negative performance for October from a modest -1.14% for the BPI Global Opportunities Fund to a honking -17.04 for the AGF Aggressive Growth Fund in US dollars.
With our regular Power Performers, all the Canadian equity funds came in negative - again the Nortel factor, but there were a few surprisingly strong performers in the US and international equity funds. MB American Equity went up 5.68% for the month. McLean Budden American Equity (which is virtually the same fund - the MB is pooled and requires a half million investment, the McLean Budden is open-ended and requires a more modest $10,000) was up 5.63%. And AGF's International Value Fund was up 7.00% in October.
So far this month the tech sector is continuing to show weakness. Some analysts think we are about to see a shift in market leadership. Others think the selling tide may have peaked and we are due for another upleg in a continuing bull market. We watch with interest!
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