Frank Holmes, chief information officer of U.S. Global Investments, is on a roll. Over the past few years, many of his firm's equity funds, including its Global Resources Fund, have racked up solid performance numbers.
While Holmes admits that the "wind is at our back" with respect to the Global Resources Fund (PSPFX), he says it's the process and discipline his fund managers practice that have given this fund its competitive edge. A look at the fund's history shows the edge he's speaking of: For the three-year period ending December 31, 2004, the average natural resources fund had a 3-year average annualized return of 16.97 percent, according to Lipper Inc., while the Global Resources 3-year aveage annualized return was 45.22 percent.
In December, this fund had about 170 stocks in its portfolio, with 45 percent invested in energy stocks, 44 percent in basic materials companies, 10 percent in chemical companies and 1 percent in paper product stocks. About 80 percent of the fund's holdings were in international companies.
Natural resources funds, however, are tricky to play because of the cycles that the commodity stocks making up this category go through. Therefore, Holmes says, the biggest risks investors need to be mindful of are slowdowns in the global marketplace, in commodity stocks and in hot countries like China.
Dian Vujovich is an author, syndicated columnist and publisher of fund-investing site www.fundfreebies.com.