Best Mutual Funds for Earnings Season

We’re off to a rough start to 2016 with the S&P 500 down over 8% in the first three weeks of the trading year. As a new bearish market begins to take hold, investors are holding out hope that corporate earnings will be the upside surprise needed to reverse course and bring back the bulls.

According to Thompson Reuters, however, profits for stocks in the S&P 500 are expected to decline 4.4% for the fourth quarter. Most of the earnings shortfalls lie at the feet of fallen energy stocks that have struggled amidst the ongoing battle in oil prices. Most analyst projections show continued earnings misses throughout 2016 before the tide turns back to the upside in early 2017.

For investors looking to maintain positive returns, mutual funds could provide the answer. Investing in funds with strong management and a solid history of outperforming the markets give investors the best chance of weathering the storm without taking on excessive risk or selling out of their holdings and possibly missing out on a recovery later on.

ProFunds Biotechnology UltraSector Inv (BIPIX)

This leveraged biotechnology fund (BIPIX) seeks returns that are 1.5 times the Dow Jones U.S. Biotechnology Index. It invests primarily in biotechnology companies such as Gilead Sciences (GILD), Amgen (AMGN) and Abbvie (ABBV), which makes it a highly volatile fund. At the same time, its performance tends to be uncorrelated with the S&P 500. Its average annual three-year, five-year, and 10-year performance is much higher than the S&P 500, registering gains of 47.90%, 42.23%, and 18.53%, respectively. Investors looking for high performance but wanting to avoid strong correlation to the broader markets might consider this fund.

Fidelity Select Retailing Portfolio (FSRPX)

This retail-focused mutual fund (FSRPX) invests at least 80% of its assets into companies that provide merchandise and services to individual consumers. It selects companies with a market cap of $10 billion or more and includes familiar household names such as Amazon (AMZN), Home Depot (HD), and Netflix (NFLX). The fund has a history of consistently beating the S&P 500 with average annual three-year, five-year, and 10-year returns of 24.06%, 19.76%, and 14.02%, respectively. As we head into an uncertain earnings season, investing in a fund that’s proven it can pick winning companies could be a safe choice.

T. Rowe Price Global Technology (PRGTX)

This mutual fund (PRGTX) invests in various technology- and IT-based companies both domestically and internationally. The fund splits its assets nearly 50-50 between domestic tech companies and international ones, with its primary ex-U.S. regions being China, the Netherlands, and the U.K. The fund has had exceptional success beating out market averages with its average annual three-year, five-year, and 10-year returns of 28.06%, 19.76%, and 14.29%, respectively.

The Bottom Line

As we head into the earnings results for the fourth quarter of 2015, the broader indexes struggle to keep the long bull market alive. Poor corporate earnings projections for the year will make it difficult for investors to maintain high returns. Mutual funds with consistent track records of beating expectations could be the key to staying afloat going into earnings season.