Unusual Stock Funds Intriguing, Still Judged on Performance
Andrew Leckey

Unusual stock funds come and go.

In the "gone" category is the Golf Associated Fund, which invested in golf-related items ranging from tour sponsors to magazines and course fertilizers.

Also history is the StockCar Stocks Mutual Fund that invested in companies related to what was then the NASCAR Winston Cup Series through its racing teams or sponsors.

Gabelli Global Interactive Couch Potato Fund did not last long either. It was destined for changes in name and portfolio.

Some unusual funds are whacky and some adhere to overly focused strategies. However, others work fine for investors seeking to add spice to predictable portfolios that had been formulated by the book.

And ideas for funds keep coming, even if they don't all get off the ground.

"I once talked with a woman who was researching chocolate companies and how they had performed historically, since they tend to outperform the Standard & Poor's 500 over a long time period," recalls Jack Bowers, editor of the independent Fidelity Monitor newsletter (www.fidelitymonitor.com) in Rocklin, Calif. "She was thinking that maybe there would be interest in launching a fund on that theme and doing all sorts of fun stuff with it."

That sweet fund didn't become a reality, but other unique concepts have come and are still around. For example, investors distrustful of the shenanigans of our elected officials in Washington have a fund that invests in stocks only when Congress isn't meeting.

"The Congressional Effect Investor Fund (CEFFX) invests in the U.S. stock market on days when Congress is out of session and is out of the U.S. stock market on days when Congress is in session," Tom Roseen, head of research services for Lipper Inc. in Denver, said of that fund, which is up 9 percent over the past 12 months.

One unique fund that's gotten a lot of publicity, the Vice Fund (VICEX), seeks long-term growth of capital by looking for firms that derive most of their revenues from products considered "socially irresponsible," such as tobacco, gambling and alcohol. It then selects stocks from that group based on their financial soundness and growth potential. It is up 30 percent over the past 12 months.

"There have been all kinds of strange industry-specific funds over the years, such as the legendary Steadman Oceanographic Fund that was built around the idea that there were companies building communities under the sea," said Russel Kinnel, director of fund research for Morningstar Inc. in Chicago. "None of these are around anymore."

Some quirky funds seem to speak to people who basically want to have something different in their portfolios, Kinnel expects. It is possible to run a mutual fund out of your basement these days, he noted. If it happens to have awesome returns, you will attract a lot of money in the beginning -- but it doesn't last.

"Lots of funds are hoping to capture lightning in a bottle," Kinnel said. "For example, there were all of those Internet funds at the turn of the century that were supposed to excel, and then in the dot.com meltdown they all got crushed."

Nonetheless, some unusual funds are viable investments.

The Monetta Young Investor Fund (MYIFX) typically invests at least 50 percent of its net assets in other funds seeking to track the Standard & Poor's 500 Index, said Roseen. The balance is put in stocks of individual companies producing products or services that are recognized by children and teenagers. It is up 23 percent this year.

A quirky name may draw attention.

Columbia Thermostat Fund Cl. Z (COTZX) uses a strategy that operates like a home thermostat. When the S&P 500 goes up in relation to predetermined ranges, the fund sells a portion of its stocks and invests more in bonds. When the stock index goes down, it increases its stock-fund investments. The premise might seem strange, but the fund has done quite well with a 12-month return of 19 percent.

Even a fund giant such as Fidelity Investments can have unusually inventive offerings.

Fidelity Select Environment and Alternative Energy Fund (FSLEX) had 10 years of subpar results when its name was the Environmental Services Fund, said Bowers, but it changed its name and broadened its charter to add alternative energy. It had been all about stocks of landfill operators, he said, but now is doing well because it added the more expansive category of environmental support services. The fund has gained 25 percent over the past 12 months.

The Fidelity 130/30 Large Cap Fund (FOTTX) has some of its portfolio long on stocks and some shorted. While that is intriguing, the fund hasn't grown all that much and currently has $39 million in assets, which is tiny for Fidelity, according to Bowers. It has gained 18 percent over the past 12 months.

Some funds invest in unusual regions, noted Roseen.

For example, the closed-end Herzfeld Caribbean Basin Fund Inc. (CUBA) invests in companies that should benefit from development in countries in the Caribbean Basin, which include Cuba, Jamaica, the Bahamas, Puerto Rico and a number of others. It is up 18 percent over the past 12 months.

Bottom line: The key to any fund -- whether unique or run-of-the-mill -- is how well it performs.

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