Shareholders in mutual funds have cringed while their portfolios shrank in value this year. It made retirement planning painful so far in 2022.
The rare mutual funds that defied the market's swoon offer safe havens. Holdings that are in positive territory, let alone outperforming, year-to-date are also worth considering as individual stock investment ideas.
That's the two-for-one opportunity offered by $441 million BNY Mellon Focused Equity Opportunities Fund (MFOMX). Nearly neck and neck with the broad market this year, it's in an elite minority of mutual funds that have avoided lagging the market.
The S&P 500 was down 6.09% this year going into Tuesday. The fund was off 6.19%. For the trailing year, the fund was ahead 17.4% vs. 15.62% for the big-cap bogey. The fund's large-cap growth rivals tracked by Morningstar Direct were up just 4.98% as a group over the past 12 months.
Mutual Funds That Outperform
Three factors jump out as keys to the fund's ability to buoy the mutual funds portion of your portfolio and ease your retirement planning, even amid a stormy market.
First, managers Donald Sauber and Thomas Lee follow a flexible approach. They're allowed to hold growth as well as value stocks.
Their top three holdings as of Dec. 31 were the popular megacap tech stocks Microsoft, Google-parent Alphabet and Apple.
Still, their large-cap value stock weighting was nearly five times greater than their peer group's, by Morningstar Direct's accounting. And they were underweight in large-cap growth.
In addition, with their leeway to invest in companies of any size, they held three times as many midcap value stocks.
Their second key is seen in the fund's risk-reward profile. In the three years ended Feb. 28, the fund gained 104% for every 100% the S&P 500 rose, according to Morningstar.com. It lost 103% for every 100% setback by the S&P 500. That edge may not sound like much, but it meant the fund had a slight head start in every rally.
In turn, that gave a tailwind to any shareholder who included this portfolio among their other mutual funds or any part of their retirement planning.
The managers' third key is reflected in their fund's name. The BNY Mellon Focused portfolio is focused. Typically, it holds 25 to 30 stocks.
Stocks In Positive Territory
Selective stock picking can up the octane in your portfolio.
So far this year, holdings like oil & gas explorer and producer Pioneer Resources, tractor maker Deere,ticker symb=DE], drugmaker AbbVie and financial firm American International Group are in positive territory. Results like that rev up your mutual funds. They're especially welcome by anyone focused on retirement planning.
Pioneer is a kind of triple play. Share prices are up about 40% this year. The main drivers are investor fears of inflation, interest-rate increases and energy supply disruptions due to war in Ukraine.
Earnings per share rose 53%, 754%, 999% and 328% the past four quarters. EPS is expected to rise 93% this year, according to analysis by MarketSmith.
Can Deere Plow Up More Profits?
Deere stock is up 23.2% this year. That's a plus for your stable of mutual funds. In fact, Deere's share price has tripled in about two years. The bad news — or at least the question mark — is this: Since this is a cyclical stock, how much more can it continue to climb?
One answer is that analysts forecast a 19% climb in EPS this year, says MarketSmith. And they see another 14% gain next year.
Still, rising interest rates will jack up farmers' costs. Yet war in Ukraine, traditionally Europe's bread basket, should raise demand for wheat and other produce by Deere's farmer customers in the U.S., Canada and elsewhere.
AbbVie Can Help Mutual Funds
Can AbbVie brighten the prognosis for your mutual funds? Shares have uptrended since late November. In December, the Food and Drug Administration granted its drug Rinvoq approval for use in patients with psoriatic arthritis. It was already OK'd as a treatment for rheumatoid arthritis.
That month, AbbVie asked the European Medicines Agency to approve Skyrizi for patients with Crohn's disease.
Skyrizi was already approved for plaque psoriasis and psoriatic arthritis in Europe. The Crohn's application would be its third approved use.
Those moves helped offset a setback for Rinvoq. Recently, the FDA required AbbVie, Pfizer and others to add warning labels to specific drugs.
MarketSmith says analysts see AbbVie's EPS growing 12% this year but falling 13% in 2023.
AIG's 'Outstanding Financial Results'
Up overall this year, American International Group can also fortify your mutual funds. But it has been bouncing up and down within a range.
By The Numbers: One Of The Best Mutual Funds
BNY Mellon Focused Equity Opportunities Fund earned a spot among the winners of IBD Best Mutual Funds 2022 Awards.
It nailed down that accolade by notching a 30.2% total return in 2021 vs. 28.7% for the S&P 500. That capped its outperformance over the three, five and 10 years ended Dec. 31, which are also required for award-winner status.
Follow Paul Katzeff on Twitter at @IBD_PKatzeff for tips about retirement planning and actively run portfolios that consistently outperform and rank among the best mutual funds.
