Small Cap Revival

May was a mixed bag for mutual fund performance but Canadian small caps were the big winners. That's not just small caps, but Canadian small caps. Looking at the Top 25 Funds for one month as tallied at The Vancouver Sun website, we find nine Canadian small caps, two Canadian equity funds, six in the resource sector, four international equity, and two each of technology and specialty funds.

One of the Canadian equity funds, the Mackenzie Industrial Growth Segregated Fund, has a current mix heavily resource dominated and could be considered a resource fund. At least one of the Canadian small cap funds, Resolute Growth, is also heavy in oil, gas and energy.

The top three month performers are mainly resource funds - the resource sector continues strong even though small caps did a bit better in May.

Last month, you may recall, the technology sector roared back with 23 of the top 25 funds in April. Fast out of the gate, but they haven't fizzled. Of the 253 science and technology funds, 55 have a return of better than 3% for the last 30 days.

Despite some gloomy earnings reports and revised forecasts coming in, many companies are still reporting record profits - particularly in the energy sector.

Watching the stocks making new highs every week in our weekly Break Out Report, some patterns and trends seem to emerge. The top trend is, of course, the continuing strength in the oil and gas sector. The second is a revival of the fortunes of gold and mining companies. And third is strength in the retail sector with clothiers in particular doing well. Forzani Group, Reitman's, Shirmax and Suzy Shier have all been hitting new highs in the last few months.

In the technology sector, aerospace stocks have done well. And while not many tech stocks have been showing new highs of late (because they're so far down from their peaks), the ones with good earnings and revenue growth are climbing back out of the hole.

Prognostication: the market continues to gain strength in selected sectors. I expect it will continue strong throughout the rest of the year, with occasional setbacks.

Rank	Fund	Type	1 Month	3 Month	1 Year
1	Friedberg International Securities Fund	International	19.53%	37.83%	76.79%
2	CTI Strategic Growth Fund	Cdn Small Cap	17.20%	21.61%	-49.28%
3	AGF China Focus Class	International	12.31%	50.29%	52.07%
4	Resolute Growth Fund	Cdn Small Cap	12.11%	39.13%	56.53%
5	Northwest Specialty Resource Fund	Resource	11.44%	23.95%	18.66%
6	EMF LifeScience Fund	Technology	11.07%	6.80%	n/a
7	AGF India Fund	International	10.71%	-20.92%	-38.00%
8	Acuity All Cap 30 Canadian Equity Fund	Cdn Equity	10.58%	9.40%	n/a
9	Avix REA	Cdn Small Cap	10.26%	4.74%	6.08%
10	I.G. Beutel Goodman Canadian Small Cap	Cdn Small Cap	10.02%	14.05%	19.75%

The Resolute Growth Fund remains the one fund making our Power Performers List. It has managed to weather the market downturn through thick and thin. It has made our list consistently every month since March 2000 and has been the only fund on our chart for the last four months.

To the end of May, the Resolute Growth Fund was # 4 for one month performance, # 2 for three month performance, # 6 for one year performance, # 4 for three year performance, and # 9 for five year performance. That's quite an accomplishment.

With such a dearth of Power Performers, we launched our Strong Performers a few months ago. These are funds with 15% return in the one year, three year and five year time frames. And this month saw an increase in the number of Strong Performers to six from three the month before. Another sign the market is strengthening.

Small Cap Revival