3 investments to help you survive Armageddon

Buy any one of these mutual funds and sleep tight at night.

By TheStreet Staff Nov 2, 2011 12:00PM

By Frank Byrt, TheStreetTheStreet

 

So, let's get this straight: The stock market slid in September, rebounded in October and now it's . . . tanking again?

 

Most recently, the S&P 500 Index ($INX) fell 2.8% yesterday, extending a two-day decline to 5.2%. Is it any wonder individual investors are checking out?

 

Instead, they ought to go with a time-tested mutual fund, one that's highly rated by industry analysts, charges a minimal amount in fees, posts consistent returns and employs a manager with a skill for stock-picking. In other words, funds that can survive the European debt crisis, a slowdown in emerging markets, a deteriorating U.S. economy. Maybe even Armageddon.

 

S&P Capital IQ cites three mutual funds, each with a different market focus, that get the job done. In a way, it's the return of buy-and-hold, except it's with mutual funds, not stocks.

 

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Here are S&P's top 3 fund picks and a sampling of their top holdings:

 

1. Wells Fargo Advantage Growth Fund (SGROX). This $6.8 billion fund is up 11.4% from January through the end of October. The S&P 500, in contrast, is little changed this year.

 

Chart for SGROX

The Wells Fargo Advantage Growth Fund has a five-year average annual return of 10%, including 24% a year over the past three years. It's in the top 1% of its fund peers in terms of performance over the past year, five-year and 10-year periods, and its annual portfolio turnover rate of about 54% is well below average.

 

Advantage Growth has an all-cap mandate, but its portfolio primarily consists of a mixture of large-cap information-technology, consumer-discretionary, health-care and energy stocks.

 

The ubiquitous maker of iPad and iPhones, Apple (AAPL), is the fund's largest holding, at 6.6% of the portfolio. Three other picks follow, with the fund's performance listed below:

 

Whole Foods Market (WFM), the fund's second-largest holding at 2.8%, is the biggest U.S. retailer of natural and organic foods. It operates about 300 stores in three countries. Comparable-store sales growth was 7.1% in the most recent fiscal year, and operating margins improved by 1.4 percentage points. Its shares are up 43% this year.

 

Alexion Pharmaceuticals (ALXN), at 2.5% of the fund, has been a big winner, gaining 68% this year. It is a developer of drugs for life-threatening medical conditions and for now, its sole product is Soliris, used to treat a rare blood disorder.

 

Carmax (KMX), sells, finances and services used and new cars through a chain of over 100 retail stores. The fund is the company's seventh-largest investor. Its shares are down 5.7% this year, but over three years it has an average annual return of 42% and over 10 years, its return is a sterling 12.4% annually.

 

2. Artisan Small Cap Fund (ARTSX). This $437 million small-cap growth fund is up 9% this year, which ranks it in the top 2% of its peers. Over three years, it has a 21% annual rate of return, which ranks it in the top 12%. Artisan takes a longer-term approach to investing than many of its small-cap peers, as indicated by its relatively modest portfolio turnover rate of 63%. Its recent focus has been on information technology, industrial and health care. They include:

Chart for ARTSXCepheid (CPHD) is the fund's largest holding at 4.6%. Its shares are up 58% this year. The company has a 10-year average annual return of 19%. The systems the company makes perform genetic analysis of DNA and RNA, and enable rapid genetic testing of organisms by automating otherwise complex manual laboratory procedures.

 

Ulta Salon Cosmetics & Fragrances (ULTA) has almost doubled this year and has a three-year average annual return of 97%. It is the fifth-largest holding at 3% of the fund. The company is a beauty-care retailer with more than 400 stores in 40 states. Ulta sells items ranging from mass-channel brands to high-end prestige labels.

 

Regeneron Pharmaceuticals (REGN) shares are up 68% this year, 112% over the past 12 months and have an average annual return of 22% over five years. The company is involved in the development of drugs used to fight inflammation, cancer and eye disease. The company has one product on the market and several others in various stages of development.

 

3. FBR Gas Utility Index Fund (GASFX). This $426 million sector-focused fund is in the top 1% of its fund peer group, in terms of performance this year and over one, three and five years. It has a return of 20.8% this year and a 15-year average annual return of 9.3%. S&P says it also has a below-average net expense ratio.

 

Chart for GASFX

Enbridge (ENB) is the largest holding in the fund at 5%. Its shares are up 25% this year, and it has a 10-year average annual return of 14%. The company operates a network of energy assets that transport and store oil and natural gas throughout North America, which includes one of the continent's largest crude-oil pipelines.

 

The Williams Cos. (WMB) is the fund's second-biggest holding, also at 5% of the portfolio. Its shares are up 24% this year, and it has a three-average annual return of 15%. The company is an integrated oil and gas exploration, development and production firm with plans to split off its exploration and production unit via a 20% IPO this year and a tax-free spin-off of the rest in 2012.

 

Oneok (OKE) is the fund's No. 7 position at 4.7% of the portfolio. Its shares are up 40% this year, and it has a 10-year average annual return of 18%. The company processes, stores, transports, and distributes natural gas and natural-gas liquids across the country.

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