AlphaProfit Provides New Recommendations on Best Stock Mutual Funds for 2014

The AlphaProfit No Load Mutual Fund model portfolio is reconstituted with best no load mutual funds in domestic, international, and emerging market categories.

2013 is turning out to be good year for stocks in most markets.

Fidelity Spartan 500 Index Fund (FUSEX) that tracks the large-cap S&P 500 index ($SPX) is now up 28% for the year.

Small cap stocks have fared better.

Fidelity Spartan Small Cap Index Fund (FSSPX) and Schwab Small Cap Index Fund (SWSSX) that track the small-cap Russell 2000 index ($RUT) are up nearly 33%.

Looking back at the year, Dr. Subramanian, Editor of AlphaProfit’s Premium Service Investment Newsletter commented, ‘Investors had plenty to worry about this year. fiscal cliff, spending reduction sequestration, debt limit increase, government shutdown, and bond purchase tapering. Yet, stock prices have continued to climb the wall of worry.’

He attributes the increase in stock prices to two key factors. The Federal Reserve’s continuation of stimulus measures and rising corporate earnings.

Although investors have been preoccupied through most of 2013 on when the Federal Reserve might taper stimulus, the central bank has continued to buy $85 billion per month in bonds and kept interest rates low to spur growth.

On the earnings front, the fraction of S&P 500 member companies exceeding revenue and EPS forecasts has consistently exceeded 50% and 70%, respectively through the last four quarters. The forward 12-month EPS estimate for the S&P 500 has risen 6% from the start of the year to $119.26.

While many foreign stock markets have lagged the U. S. market in 2013, developed foreign markets have performed better than emerging markets.

Fidelity Spartan International Index Fund (FSIIX) that tracks the MSCI EAFE index is up over 19%.

Japanese stocks have been among the better performers in developed markets with the average Japan fund up close to 32%. The Fidelity Japan Fund (FJPNX), for example, is up 25% this year.

Select European markets such as those in the Nordic region have also been among the leaders. This has helped the Fidelity Nordic Fund (FNORX) gain 38% this year.

Emerging markets are lagging in 2013 with the average diversified emerging market fund a tad under water. Fidelity Spartan Emerging Markets Index Fund (FPEMX) that tracks FTSE Emerging Index is down over 4%.

Markets in Latin America and India have notably underperformed. Fidelity Latin America Fund (FLATX) and Matthews India Fund (MINDX), for example, are down 14% and 11%, respectively.

AlphaProfit’s No-Load, No-Transaction-Fee Growth model portfolio that includes a mix of domestic and foreign funds is up over 30% this year. ahead of the 25% advance recorded by its global market benchmark.

The model portfolio has benefited from contributions made by Brown Advisory Small-Cap Fundamental Value Fund (BIAUX), Dreyfus Small Cap Stock Index Fund (DISSX), Matthews Japan Fund (MJFOX), and Oakmark International Fund (OAKIX) that are all up over 38%.

What’s Ahead for No Load Stock Mutual Funds in 2014?

Investors have enjoyed a relatively smooth ride in 2013. The volatility index ($VIX) has stayed below 22 compared to 28 in 2012 and almost 50 in 2011.

The year’s largest correction was a relatively mild 5% decline in the S&P 500 during the May-June period when yield on the 10-year Treasury bond spiked 84 basis points.

Janet Yellen, the next Federal Reserve Chair, has stated that the economy and labor market are performing ‘far short of their potential’ and must improve before the central bank can begin reducing monetary stimulus.

While this has prompted investors to turn complacent, Dr. Subramanian cautions that investor’s angst on tapering of stimulus has only been deferred. He points out there is hardly any unanimity among Federal Reserve officials on continuing stimulus and tapering is bound to become a point of concern again.

From stock price and valuation perspectives, near-term momentum is with the bulls. Over 82% of S&P 500 members are trading above their 50-day moving average.

Stock valuation metrics have expanded following the rise in prices. The current 12-month forward P/E at 15.0 is higher than both its 5-year and 10-year averages of 13.0 and 14.0, respectively.

Momentum in stock prices is driving investors to buy stocks in a bid to capture near-term money making opportunities. Such an approach is fraught with risk .

Dr. Subramanian says, ‘Investor’s expectations, as implied by larger P/Es, are higher now compared to recent years. The U. S. stock market needs to transition from being stimulus-driven to being earnings-driven to continue advancing through 2014.’

‘Corporate earnings growth needs to accelerate even as stimulus tapers and support higher valuation metrics. Hiccups in this transition can cause stocks to sell off. Stocks can continue to reward investors in 2014 but the ride is likely to be bumpier than in 2013,’ cautions Dr. Subramanian.

Best No Load Mutual Funds for 2014

The AlphaProfit No Load, No Transaction Fee Growth model portfolio will be repositioned with new recommendations of best no load mutual funds on Tuesday, November 19. Learn more about AlphaProfit’s Fidelity fund recommendations and Fidelity funds model portfolios .

The No Load, No Transaction Fee Growth model portfolio includes best-of-breed funds in domestic, foreign, and specialty categories selected from proven style rotation principles. This selection method has enabled the Growth model portfolio to gain at a 19.2% annual rate during the past five years.

In comparison, the model portfolio’s benchmark consisting of domestic and foreign indexes has gained at a 14.2% annual rate.

In simple terms, the AlphaProfit No Load, No Transaction Fee Growth model portfolio has helped Premium Service subscribers earn 50% more money than index investors.

The model portfolio has benefited from contributions made by domestic funds like Fidelity Small Cap Discovery Fund (FSCRX) and Janus Venture Fund (JAVTX) that are up over 250% in the past five years as well as foreign funds like Wasatch International Growth Fund (WAIGX) and Westcore International Small Cap Fund (WTIFX) that are up over 230% .

Commenting on new mutual fund recommendations Dr. Subramanian says, ‘Our top priority is to help subscribers preserve their recent gains and position their portfolios for additional gains with low volatility going forward.

AlphaProfit’s emphasizes valuation & asset price correlation in investment selection to make the ride less bumpy for subscribers and uses market timing to make volatility work for them.

Looking at opportunities globally, Dr. Subramanian says ‘Shares of nearly 450 of the S&P 500 members are up this year. The 12-month forward P/E on U. S. stocks has increased nearly 20% this year. This makes it harder for us to find attractively priced opportunities in the U. S.

‘Meanwhile, stock valuation metrics and growth rates are both attractive in emerging markets. China, for example, plans to spur growth with the biggest expansion of economic freedom since the 1990s. As such, 2014 could be a year when emerging market mutual funds fare better than their domestic counterparts.

‘We look to recommend best no load mutual funds focusing on the right investment styles in domestic, foreign, and emerging markets to help subscribers add to their gains during the remainder of 2013 and into 2014,’ Dr. Subramanian concludes.