Remember when owning a mutual fund was about as exciting as cold oatmeal?
All it did was go up.
Geez, how boring is that?
You had no idea which stocks were in the fund.
Your smooth-talking car salesman – er, adviser – pitched the RSP tax break and you wrote him a cheque.
You were led to believe your equity fund was money in the bank.
You wanted heart-stopping action?
You’ve got it now.
Funds have long been trumpeted as safe, diversified investments, but there are funds out there now that are more fun than Las Vegas (or Lost Wages) and fund managers who have the guts of riverboat gamblers.
If you’ve been on extended vacation in Fiji, don’t open your fund statement. Not without a stiff shot of Scotch.
Say you ploughed your hard-earned dollars into the Mavrix Enterprise Fund on Jan. 1 and spent the next nine months quaffing coco locos on a beach somewhere.
Through Sept. 30, your investment is down about 68 per cent!
And, to add insult to injury, you’re paying for this honour. The fund charges a 2.74-per-cent MER (management expense ratio).
The well-oiled mutual fund industry PR machine, working overtime with net redemptions in Canadian mutual funds at a rate of a billion dollars a month, will make you feel better by telling you that it’s a market thing.
In the case of Mavrix Enterprise, that’s kinda tough to sell. You can’t even pin this one on Martha Stewart.
In the 12 months through Sept. 30, you’re about 50.9 per cent in the hole. The group average for the same period is -19.6 per cent. The TSX is down about 13 per cent and the Dow 17 per cent.
Now that’s exciting.
You figure it can only go up from here? Think again. The fund is stacked with volatility, with top holdings such as Bombardier (BBD.A-TSX), Cisco Systems (CSCO-Nasdaq) and AOL Time Warner (AOL-NYSE).
At least Mavrix, formerly YMG Capital Management, isn’t shy about advertising the fact that it’s marching to the beat of its own drummer.
“The name says it all,” states Mavrix CEO Mal Spooner on the home page. “In fact, we hope the aggressive moniker will serve to discourage investors who prefer to behave like cattle, and encourage maverick thinkers to use our funds.”
(Yes, that’s the same Spooner who used to pick stocks in this column until 21 months ago when he stated that EMG Manufacturing, then $4.50, would be “10 bucks - in no time,” setting the stage for a collapse to 29 cents).
The Mavrix Growth Fund, managed by Spooner, is even more exciting than the Enterprise fund. Which is to say that some of the holdings trade on the adventurous TSX Venture Exchange.
Among top holdings are Venture gold penny stocks such as Rubicon Minerals (RMX), Temex Resources (YTM) and Terraquest Energy (TRQ-TSX), all speculative high-risk plays.
The Growth fund is down about 48.4 per cent year to date (through Sept. 30).
Of course, Mavrix has plenty of company when it comes to funds that underperform the indexes.
Tech funds have also given investors quite a thrill ride, including the Transamerica Life IT Fund, down 53.9 per cent year to date, and the CIBC Global Technology Fund, down 48 per cent year to date.
While precious metals funds have stolen the show in the past year, led by the Royal Precious Metals Fund up 100 per cent, there are a handful of small-cap and microcap diamonds in the rough, two of which are
managed by Calgary portfolio managers.
Those are the Bissett Microcap Fund, co-managed by Chris Fernyc and Garey Aitken, up 55.3 per cent in the past 12 months, and the Mawer New Canada Fund, managed by Martin Ferguson, up 40.1 per cent over the same period (for Ferguson’s top picks, see Pro’s 3 Stars headlined 'Small-cap fund riding opportunity wave').
Among other big winners over the past year are the small-to-midcap Sprott Canadian Equity Fund (+50 per cent) and the energy-weighted Resolute Growth Fund (+45.9 per cent).
These funds have one thing in common. They’re loaded with humdrum stocks. Cold porridge never tasted so good.
HOT ALBERTA STOCK: Pelorus Navigation Systems
PN-TSX .25
Up 19 cents (+316.7%) on 21,300 shares (for week ending Oct.11).
Pelorus is in the business of facilitating soft landings for aircraft. Well, the Calgary company’s stock also had a soft landing. After bottoming out at six cents, it hit the runway with a tail wind, rocketing for a triple and more than doubling in a single day. One more triple and it'll be flirting with its 12-month high of 65 cents.
COLD ALBERTA STOCK: Churchill Corp.
CUQ-TSX $1.95
Down 95 cents (-32.8%) on 222,800 shares (for week ending Oct. 11).
Churchill built a sturdy foundation on a history of profitability. So, when the Edmonton construction company warned that it would lose money in its third quarter in the range of one to five cents a share, investors ran for cover. The company also showed poor visibility for its fourth quarter, forecasting anything from a three-cent-a-share loss to a three-cent-a-share profit. Churchill blamed political uncertainty around the world for causing delays in major energy projects.
