THE BEST STOCK FUNDS OF 2023 | Kanebridge News
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THE BEST STOCK FUNDS OF 2023

The ‘Magnificent Seven’ tech stocks helped drive a rebound at many large-cap funds after a dismal 2022. The winner surged 65.2%.

By By LAWRENCE STRAUSS
Thu, Jan 18, 2024 10:01amGrey Clock 6 min

Large-cap companies led the way in 2023, benefiting the money managers who believed in them.

Driven by a rebound in large and megacap stocks, in particular the “Magnificent Seven” technology companies, mutual-fund managers who saw double-digit losses in the market rout in 2022 found themselves rewarded for their patience this past year.

Nine of the top 10 stock funds in The Wall Street Journal’s Winners’ Circle survey of mutual funds, which covers the 12-month period ended Dec. 31, are in Morningstar’s large-cap growth category—often with big weightings in outperforming sectors such as technology, communications services and consumer discretionary. Those S&P 500 sectors notched total returns, including dividends, of 57.8%, 55.8% 42.4%, respectively, easily topping the broader market’s 26.3% result.

Still, the Magnificent Seven paced the market. These stocks—Alphabet, Amazon.com, Apple, Meta Platforms, Microsoft, Nvidia and Tesla—all gained more than 48% last year.

Nvidia, whose chips have become synonymous with exploding interest in artificial intelligence, was the biggest winner among those stocks with a gain of 239%. It was followed by Facebook parent Meta at 194% and Tesla at 102%. These were popular holdings among the top-performing funds in the latest survey, though it varied by the individual manager.

Excluding those stocks, the S&P 500’s return was only 9.9%, according to S&P Dow Jones Indices. In other words, the Magnificent Seven accounted for more than half of the index’s 2023 performance and boosted the returns of many funds as well.

Still, there was plenty of good performance across mutual funds, and it wasn’t always contingent on those seven stocks. A rising tide lifts most boats.

Survey parameters

For the latest 12-month period, more than 1,000 of the 1,191 funds tracked in the Journal’s survey made double-digit gains. The average fund returned 19.7%, and only four funds registered declines.

To qualify for inclusion in the Winners’ Circle, funds must be actively managed U.S.-stock funds with more than $50 million in assets and a record of three years or more, as well as meet a handful of other criteria. The survey excludes index and sector funds, funds that employ leverage strategies and most quantitative funds. The results are calculated by Morningstar Direct.

As always, this quarterly competition isn’t designed to create a “buy list” of funds for readers, but to demonstrate the ways that specific investment strategies benefited from recent market trends. Some of the funds that were highlighted a year ago have fallen in the rankings just as growth portfolios have grabbed the limelight—and that phenomenon isn’t uncommon.

Moreover, not all funds cited in these quarterly surveys may be available to investors, and they may have elements that make them unsuitable for some investors, ranging from their fee structure to their longer-term performance or volatility.

Take the latest No. 1 fund, for example. The $500 million Virtus Zevenbergen Innovative Growth Stock Fund (SAGAX) lost 55.4% in 2022 and 10.1% in 2021 as tech stocks tumbled amid the Federal Reserve’s rate-hike campaign and recession worry.

The fund returned 65.2% last year, however, thanks to the big turnaround for the large-cap growth stocks.

Patience paid off

“Markets and management teams spent all of 2022 fearing and preparing for a recession that has so far failed to appear, but that excess pessimism really swung the pendulum too far in terms of market sentiment,” says Joe Dennison, a portfolio manager of the Virtus fund. “That has created some great opportunities for patient long-term investors.”

It holds five of the Magnificent Seven, three of which—Tesla, Nvidia and Amazon—are among its top 10 holdings. Tesla, its largest holding, stands at 7.7% of the fund.

These stocks aren’t new to Dennison and his co-managers. The fund first bought shares of Nvidia in 2017. Its holdings in Tesla and Amazon date to 2010 and 2008, respectively.

Dennison says the biggest contributors to the fund’s 2023 performance besides Tesla and Nvidia were MercadoLibre, an e-commerce company in Latin America, and Shopify, an e-commerce business platform. Those stocks gained 86% and 124% last year, respectively.

The Virtus fund doesn’t shy away from high valuations. As of Dec. 29, the trailing price-to-earnings ratio of stocks it holds was 70.4, excluding negative earnings. This approach, however, can be volatile.

Indeed, Dennison acknowledges “there will be volatility and periods of underperformance,” but he adds that it’s important to focus on longer-term performance and stick with companies that the managers believe in.

Best of the rest

No. 2 in the latest survey, with a return of 59.1%, is the $290 million Value Line Larger Companies Focused Fund (VALLX), which holds all of the Magnificent Seven. They were initially put into the fund before 2023—though it did add to Amazon, Google parent Alphabet, Microsoft and Tesla in the first nine months of last year.

It trimmed its positions in Apple and Meta over that stretch.

The fund’s manager, Cindy Starke, says that 2023 was all about “adding to names that we had more conviction in,” rather than trying to unearth new stocks.

Starke looks for companies she thinks can increase sales at a three-year annualised compound rate of 10% or more and annualised earnings growth of at least 15% for three to five years.

She points out that the fund had broad stock appreciation last year: 25 of the holdings gained at least 50% over the year’s first three quarters. (That fund and others release quarterly holdings with a lag after the quarter ends, but performance is updated daily.)

Besides the Magnificent Seven, the fund’s winners included Uber Technologies, which appreciated 149% in 2023. It was put in the portfolio in the fourth quarter of 2021 and was the fund’s largest holding, at 6.5%, as of Sept. 30. Starke increased her holding in 2023.

When she added Uber to the fund in 2021, she recalls, “I just thought it was very undervalued” and that “the growth model would mature.”

Other top holdings include Nvidia, initially put into the fund in 2018; Microsoft (2020); Alphabet (2011) and Tesla (2021).

Two other big gainers for that fund: Advanced Micro Devices, which leapt 127% last year, and cybersecurity firm CrowdStrike Holdings, which rose 143%.

At the same time, Starke did plenty of selling. She trimmed the fund to 39 names from 47 over the first three quarters of 2023, jettisoning stocks such as Goldman Sachs, Walt Disney, Bank of America, Estée Lauder and Devon Energy. “I just got out of the names that didn’t offer me the same kind of growth opportunity,” she says.

Rounding out the top four funds are the $500 million Baron Fifth Avenue Growth Fund (BFTHX), which returned 57.2%, and the $11 billion Fidelity Blue Chip Growth K6 Fund (FBCGX), up 55.6%.

An outlier

A party crasher at No. 5 is the Morgan Stanley Inception Portfolio (MSSGX)—the lone fund in the top 10 outside of the large-cap growth category.

It toils in small-cap issues, which lagged behind large-caps last year. The Russell 2000 index of small stocks returned 16.9% in 2023, trailing the S&P 500 by nearly 10 percentage points.

But the Inception portfolio punched well above its weight, notching a return of 54.4%.

The fund’s managers aren’t afraid to make outsize bets. As of Sept. 30, its information-technology weighting was 38%, compared with 21.4% for the Russell 2000 Growth Index—the fund’s benchmark.

One of its best holdings as of Sept. 30 was Affirm Holdings, which runs a buy now, pay later platform. The stock gained more than 400 % last year.

But that small-cap fund is an outlier in the Winners’ Circle. It is the only one outside of the large-cap growth category among the top 24 finishers in the survey.

At No. 6 is the $25 billion Harbor Capital Appreciation Fund (HACAX), returning 53.7%. As of Sept. 30, the Magnificent Seven accounted for six of its top 10 holdings.

The fund’s managers did make some hay in healthcare, an unloved S&P 500 sector that otherwise eked out a 2.1% return last year, including dividends.

One such healthcare winner it held is Eli Lilly. The pharmaceutical company’s stock returned 61%, helped by its strong position in a nascent class of drugs for weight loss.

“We’re trying to find companies that can generate above-average growth rates sustainably over an investment cycle,” says Blair Boyer, a co-manager of the fund.

Another healthcare company that fit the bill for the fund is Novo Nordisk. Its portfolio includes the Wegovy weight-loss drug. The stock was up more than 50% last year.

The fund unloaded its positions in Thermo Fisher Scientific, which sells testing equipment and measurement tools to laboratories, and life-sciences company Danaher. Thermo Fisher Scientific’s stock fell 4%, and Danaher dropped by 2%.

One of the fund’s biggest sector bets last year was consumer discretionary, representing 25% of the fund at the end of the third quarter, compared with a 16% representation in the Russell 1000 Growth Index.

Shares of vacation-rental company Airbnb, another of the fund’s holdings, surged by 59%.

Ultimately, while large-caps mutual funds enjoyed the Magnificent Seven-led rebound last year, it’s impossible to say how they will fare in 2024 given uncertainty about the economy and the path of the Fed’s monetary policy.

But despite fickle market sentiment, managers of top-performing funds say the key to their success is patience and staying true to their strategy even when things look bleak, as in 2022.

“It was about staying the course, having the conviction and adhering to our investment philosophy in good times and bad,” says Starke of the Value Line fund.



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Saudi Arabia’s 2024 Summer TOURISM Plans Unveils New Incentives and Global Attractions

“Saudi Summer is Next Door” plans to boost tourism in the Kingdom over four months across seven destinations.

Wed, May 22, 2024 4 min

Saudi Arabia has unveiled its plan to attract international tourists this summer. The strategy includes appealing visa options, complimentary airline tickets for families, a lineup of major events, and opportunities for tax-free shopping.

The initiative, organized under the guidance of Ahmed Al Khateeb, Minister of Tourism and Chairman of the Saudi Tourism Authority (STA), is named “Saudi Summer is Next Door.”

Jeddah

Extensive Summer 2024 Tourism Activities

The initiative will span four months, ending in September, and will be hosted across seven key destinations: Aseer, Al Baha, Taif, the Red Sea, Jeddah, Riyadh, and AlUla.

It features over 550 tourism products and more than 150 specially tailored offers and packages for families and various interest groups including adventure enthusiasts, luxury seekers, and cultural and heritage buffs.

The launch event of the Saudi Summer Program 2024 was attended by notable figures such as Zurab Pololikashvili, Secretary-General of the World Tourism Organization, in addition to more than 250 key partners from both public and private sectors, prominent media personalities, and influential opinion leaders.

Showcasing Global Events and Cultural Richness

This year’s program will also welcome back the Jeddah Season and introduce the Aseer Season, each filled with various activities and events for families. The Kingdom will host several significant events as part of the summer program, including the first Esports World Cup in Riyadh, an eight-week competition featuring top esports athletes, and various boxing tournaments in Riyadh and Jeddah.

During the event, Al Khateeb highlighted the latest global tourism trends, the Kingdom’s growth in the tourism sector, and the record-high tourist numbers that have propelled Saudi Arabia to the top of the UN World Tourism list and the G20 nations list.

Al Baha

Al Khateeb emphasized, “Saudi Arabia is witnessing a transformative period in tourism, driven by our vision to position the Kingdom as a premier global destination. The Saudi Summer Program 2024 is our commitment to showcasing the rich cultural heritage, natural beauty, and unparalleled hospitality that Saudi Arabia offers. “We invite local and international tourists to experience the diversity of our seven unique destinations and take advantage of the exceptional offers and packages designed to create unforgettable memories. “This initiative, supported by our strategic partnerships and groundbreaking efforts like the eVisa and increased flight connectivity, demonstrates our dedication to making Saudi Arabia more accessible and appealing to tourists worldwide. “We look forward to welcoming visitors from all corners of the globe to explore and enjoy the vibrant experiences that await them this summer.”

Zurab Pololikashvili, Secretary-General of the World Tourism Organization, also remarked, “Saudi tourism is witnessing unparalleled development at all levels, achieving great leaps in recent years, which I witnessed during my multiple visits to this hospitable country.”

Riyadh

“Saudi Arabia has global indicators related to the number of tourists, which has qualified it to top the UN World Tourism list of significant tourist destinations.”

“All of these great achievements for Saudi tourism would not have been possible without proper planning by those in charge of the sector in the Kingdom and the great potential it possesses in terms of diverse climates, stunning natural landmarks, and the generosity of Saudi people who are distinguished by their hospitality, raising the ceiling of ambitions for new achievements.”

STA CEO Fahd Hamidaddin said: “While temperatures in the region rise to high levels during summer, temperatures in the highlands of Saudi Arabia in the southern region decrease to the extent that we even witnessed snowfall in Al Soudah yesterday.” “Through the promotional campaign for the Saudi Summer Program 2024, we seek to highlight the uniqueness of our destinations and their climatic, natural, and cultural diversity, along with the exceptional events and activities happening during summer. “This year’s summer program includes more than 550 tourism products and 150 special offers designed in collaboration with STA’s partners, which include attractive offers from hotels, airlines offering free tickets for children in partnership with major travel, tourism, and aviation companies, and exceptional products in the Aseer Season and Jeddah Season like tax-free shopping offers and many new and exciting experiences such as private beaches for tourists and ladies’ beaches.”

“The campaign slogan “Saudi Summer is Next Door” embodies an open invitation to explore the magic of Saudi destinations and their diversity. This diversity is expressed with simple words that reflect the uniqueness of each destination, such as “Closer,” “Cooler,” “More Beautiful,” and “More Affordable.”

The private sector is a very important component of the success of tourism programs and initiatives, and the Saudi Tourism Authority is committed to empowering it by fostering demand for products and offers that align with the aspirations of tourists globally.

The launch of the Saudi Summer Program 2024 marks a period when visiting the Kingdom has become easier, smoother, and safer through measures such as the availability of the eVisa to citizens of 66 countries, a 20 percent reduction in eVisa prices, and a significant increase in the number of weekly flights from

Gulf cities to Saudi summer destinations, now totaling 1,100.

Residents of the GCC can also benefit from the GCC residents visa, which allows them multiple entries and a stay of up to 90 days in the Kingdom over a year. Moreover, the number of hotel rooms available to travelers is set to increase, with an additional 25,000 rooms expected to be added this year.

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