US Value Funds Top Performers for March

US funds that focus on smaller companies, value and recovery stocks dominate the list of March's top gainers, while tech and China funds are laggards

James Gard 1 April, 2021 | 3:11PM
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The worst performers of 2020 continue their recovery, with US value and global special situations funds at the top of the leaderboard for March. Meanwhile, China and tech focused funds were among the worst performers in the month.

Overall, it was a decent period for global equities as US benchmarks hit new record highs in what was the best month for shares since November. The signing of the $1.9 trillion coronavirus relief bill in the US helped boost sentiment, and while government bond yields continued to rise, there was none of the bond market volatility that rattled investors in February.

Top Performing Funds of March

March gains were relatively modest in comparison with months like November 2020. The best performing fund in March was Silver-rated Robeco BP US Large Cap Equities, with a gain of 8.8%, closely followed by Fidelity Special Situations which rose 8.3%. US value funds dominate the top 20 best performers in the month and the Robeco fund is heavily weighted towards these stocks, which are currently back in favour. Its biggest sector weightings are towards financial services, consumer cyclical and healthcare. The fund fell 2.2% in 2020 despite the broader market gains and sharp recovery from the coronavirus sell-off.

Neutral-rated Fidelity American Special Situations also makes it into this month’s top 10 with a gain of 7.7%. Special situations funds often appeal to contrarian investors who want exposure to unloved stocks that can bounce back in the right conditions. In very bullish markets like 2020, these funds often underperform significantly, but four of this month’s top performers have a “special situations” remit.

The end of March marks the cloes of the first quarter of the year, and the trends for the first three months of 2021 as a whole are broadly similar, with US smaller companies on top. Bronze-rated Legg Mason US Smaller Companies is the best of the bunch with a rise of 23% - but unlike many of March’s winners, the fund also managed a 20%+ gain in 2020.

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The Worst Performing Funds of March

Some of the best performing Morningstar rated funds of 2020 found themselves at the bottom of the pile for March. Silver-rated Baillie Gifford Worldwide Discovery posted a 74% gain in 2020 and was the fourth best performing fund of the year, but it fell 10% in March. The fund’s top holding is Tesla (TSLA), which has so far struggled to match 2020’s meteoric gains.

Along with tech-focused offerings, China funds were among the stellar performers of 2020, but finds themselves in March's laggards list. Robeco Chinese Equities was among the standout funds of 2020 with a rise of 58% but was among the biggest fallers in March 2021 with a loss of more than 5%. But the biggest fall from grace in 2021 has been the Silver-rated Morgan Stanley US Growth fund, which was the best performing open-ended fund rated by Morningstar last year with a staggering gain of 110%. In March, the fund was down 6%. 

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Can value-focused funds maintain their winning streak? While there are many uncertainties around a Covid-19 third wave, especially in Europe, most economists expect a strong recovery after the 2020 slump. This is likely to favour more economically sensitive stocks.  “Rising rates and improvement in the global economic outlook has led to a surge in expectations for cyclical stocks at the expense of growth stocks,” says Geir Lode, head of global equities at Federated Hermes.

Note: At the time of writing, not all fund houses had reported March data to Morningstar

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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James Gard  is content editor for Morningstar.co.uk