Are you frustrated that even many of the best mutual funds look wounded amid recent market volatility? Chin up. If you're seeking inspiration for the diversified portion of your portfolio or looking for individual stock ideas, check out $24.4 billion Vanguard Windsor Fund Investor Shares (VWNDX).
Vanguard Windsor is one of Vanguard's best known, highest profile funds.
It is a value-oriented, actively managed mutual fund. It has outperformed the broad market recently and over the past 12 months, going into Wednesday. And it owns stocks that have held onto positive gains for the year and are topping the market. Many also happen to have key traits that CAN SLIM investors would appreciate.
Among those leaders are financial services giants Charles Schwab and American International Group. Their IBD Composite Ratings recently were 94 and 97 respectively.
Best Mutual Funds: Fueled By Energy Stocks
Many of those stronger holdings are energy stocks. They include Exxon Mobil and ConocoPhillips. Diamondback Energy is also in that group. The company engages in exploration and production of unconventional and onshore energy sources. It's also active in the Permian Basin.
All three of those had IBD Composite Ratings of 99 as of Wednesday.
A Composite Rating of 99 means that a stock is in the top 1% of all stocks on a number of technical and fundamental factors, including both price performance and earnings. The best way to use the Composite Rating is to watch for stocks that have 90-plus scores and are forming bases or are in follow-on buy areas. That way, you spot the best-positioned stocks before they start big price runs. Look up a stock's Composite Rating at IBD Stock Checkup.
Returns by those three energy stocks over the past 12 months range from Exxon's 67% to Diamondback's 110%.
Success by energy stocks reflects the sector's outperformance this year. So far this year it is the only one of the 11 major S&P 500 sectors to notch an advance as a group. The sector was up 17.9% going into Wednesday, according to FactSet. An energy-rich portfolio will look like one of the best mutual funds, at least for now.
Financials were second best sector, down 1.56% as a group.
Vanguard Windsor Holds Growth Stocks
Vanguard Windsor is no stranger to growth stocks. Despite its overall categorization, 10% of its holdings are large- or midcap growth stocks, according to Morningstar.com. Another 38% were blend stocks — stocks with traits of both value and growth stocks.
A key reason for the fund's diverse portfolio is its mission. "Throughout its history, the fund has sought to be ahead of the market, investing in stocks that are temporarily out of favor, but that the fund's advisors believe will eventually become profitable investments," fund literature said.
That strategy has its price. "This approach can lead to greater short-term volatility because it may take time for the market to recognize a stock's value," the fund said of itself.
Who Runs This Fund
What else makes Vanguard Windsor Fund tick? The portfolio consisted of 129 stocks as of Dec. 31. Ninety-one percent of holdings are U.S. stocks. Two separate teams of subadvisors split buy and sell decisions.
Wellington Management's David Palmer focuses on stocks in high-quality companies currently out of favor with investors.
The second subadvisor team follows what Vanguard calls a deep value approach. That team seeks good businesses at low prices. The Pzena Investment Management trio — Richard Pzena, Benjamin Silver and John Flynn — focuses on companies underperforming their historically demonstrated earnings power.
Vanguard's Daniel Newhall oversees the subadvisors.
Strength Beyond Energy Sector
What else helps make a portfolio one of the best mutual funds? At the moment, financial stocks help. Insurer Chubb is up 0.18% this year and 28.91% over the past 12 months.
It has a Composite Rating of 92.
Chubb sells insurance and reinsurance products in more than 50 countries.
Chubb provides commercial and personal property and casualty insurance. It also sells personal accident and supplemental health insurance, reinsurance and life insurance, all to a diverse group of clients.
Zions Bancorp is another financial that is currently a safe haven. Jumping back into positive territory on Tuesday, it is now up 5.26% year to date. It is up 43.87% for the trailing 12 months.
The Utah-based holding company runs banks in several Western states, including California, Arizona, Nevada, Colorado and Washington.
By The Numbers: Best Mutual Funds Now?
Is Vanguard Windsor one of the best mutual funds? The fund is outperforming so far this young year, but only by having lost less than the broad market. It is down 1.65% vs. -8.54% for the S&P 500 and -3.12% for its large-cap value rivals tracked by Morningstar Direct.
Better yet, over the past 12 months the fund had a 21.9% total return vs. the big-cap bogey's 14.6%. Its large-cap value fund rivals are up an average of 18.61%.
Still, while growth stocks and funds in general outperform value, this fund is more of a shock-absorber in occasional broad market downturns. It has modestly lagged the S&P 500 over the past three, five and 10 years.
Follow Paul Katzeff on Twitter at @IBD_PKatzeff for tips about personal finance and actively run portfolios that consistently outperform and rank among the best mutual funds.
