5 ways to beat the stock market — from a fund manager who’s done this for years

Wall Street is so full of greed, fraud and ego, a cynic might say it’s no place for any kind of spirituality to find a home.

But several religious precepts might actually help investors if they paid them more mind, judging by the long-term returns of Amana Growth Fund

The fund avoids companies in activities prohibited by Islamic law. That brings the expected ban on alcohol, “sin” and pork-processing companies. But it also layers in core investing principles that help this fund’s long-term outperformance. You’d probably be wise to follow these concepts — described below — whatever your religion.

I also take a look at other principles you should adopt because they help explain this fund’s record, according to Scott Klimo, now lead manager of the fund after co-managing it since 2012. The fund beats its Morningstar category (large-cap growth) by 1.3 to 1.8 percentage points annualized over the past three and five years, with less volatility to boot, according to Morningstar.

Here’s a look at investing concepts you can borrow from this fund to boost your returns and, who knows, get more peace of mind in the process.

1. Avoid debt

Islamic law prohibits paying or receiving interest, so banks are out. But this also contributes to the imposition of limits on company debt. Any businesses with a debt-to-market-cap ratio above 33% get the boot.

“We believe that financial sustainability is integral to the success of a business,” Klimo told me in a recent interview. “We’ve done multiple studies, and it just works. It creates a nice tailwind, and this contributes to performance.”

A basic investing principle is at work here: The easiest way to make money is to not lose it. Heavily leveraged companies can blow up, so avoiding them reduces risk. “Risk reduction goes hand in hand with performance,” says Klimo.

This rule keeps the fund out of notoriously volatile areas like basic materials, real estate, telecom and banks. This means the fund bounces around less than the S&P 500
the Dow Jones Industrial Average

 and Nasdaq Composite
The Amana Growth Fund is one of the least-volatile funds in its category, says Morningstar analyst David Kathman.

2. Stop watching every tick and overtrading

Spend any time on Twitter and you’ll notice how mesmerized people get watching the market and their stocks trade all day, commenting on every little move. This is pretty stupid, and a big waste of time. It doesn’t make your stocks go up any faster. It drains energy by creating stress.

“People just bang their heads against the wall sometimes,” says Klimo. “Sturm and drang doesn’t really add value.”

This is valuable advice, both for reducing stress, and for freeing up time for activities that actually help — like actual research.

Because Islamic law discourages speculation, excessive portfolio trading is out at the Amana Growth fund. It has a decidedly long-term approach. The average holding period is greater than 10 years. It has held Apple

 since maybe before you were born — the early 1990s.

So when COVID-19 hit the headlines in March, Klimo didn’t scour holdings for names to ditch because they might fall more. “We said we own good companies and they will come out strong on the other side. So it will be fine,” says Klimo.

Part of this long-term doctrine means having the sense to stay in good names even if they look expensive. “We will hold if the operational thesis is still intact,” says the fund manager.

For example, Amana Growth has a 6% position in Intuit
That’s a really big holding given that many mutual funds limit size of a single holding to 1%-2% of the overall portfolio. The tax and financial software company looks pricey with a forward P/E in the upper 30 range. Growth may get hit as COVID-19 puts customers out of business.

“But they have a tremendous long-term double-digit earnings growth track record,” says Klimo. “We still like the story long term.” Near-term, Intuit would get a boost if Joe Biden becomes president in January, which would bring lots changes to federal tax laws, in turn supporting demand for its products.

When does Klimo sell? Triggers include a change in the original investment thesis, or signs of management malfeasance.

3. Invest in companies with a sustainable competitive advantage

A favorite is companies with a clear technology edge. Klimo has a 4.7% position in ASML

which makes lithography machines that produce chips. ASML has a lock on the market with 75% share. As this business transitions to “extreme ultraviolet lithography,” which uses ultraviolet wavelengths in chip production, ASML will have 100% market share, predicts Klimo. “They will just own the market. They have a technological edge over everybody.”

Another example: TJX
a 2.8% position. Klimo thinks TJX, whose stores include T.J. Maxx, Marshalls and HomeGoods, is so good at discount retailing and setting up the lure of the “treasure hunt,” it has its own niche — and a protective moat that keeps competitors at bay. Now, with retailers going out of business because of the slowdown, TJX will be able to find even more bargains for shoppers, which will help results.

4. Invest in high quality of management

You can spot them by looking at their track records. Klimo owns the home improvement retailer Lowe’s

in part because Marvin Ellison took over as CEO in 2018, after years of producing great results at Home Depot
Now he’s using many of the same tactics to boost profit margins at Lowe’s — like fine-tuning inventory management and online operations.

Klimo is also sticking with Apple because of the “tremendous” leadership of CEO Tim Cook. Klimo cites Apple’s success with services. Popular offerings like Apple Pay, iTunes and the App Store, have thrived under Cook. Unlike skeptics, Klimo isn’t worry Apple will stumble in smartphone innovation. He expects new 5G-capable models coming out in the fall to be a hit. “We still have supreme confidence in the investment thesis.”

5. Go with diversity at the top

Klimo likes gender diversity in top management and boards because he says it improves company performance. Here, he cites holding Estée Lauder
 which has five women on its executive team including the CFO, and seven women among its 16 board members. Klimo expects continued growth through expansion in China and other parts of Asia. He also rejects the theory that working from home stifles cosmetics demand. “People still want to look good on their Zoom calls.”

What’s ahead for the economy

Klimo also likes Estée Lauder’s history of holding up in a weak economy. That’ll come in handy, because he doesn’t expect a “V-shaped” recovery. He cites the continuing spread of COVID-19, which will worsen when flu season arrives. Even if governments don’t impose broad lockdowns, companies will shut facilities and stores.

See the latest MarketWatch coronavirus coverage here.

Another risk few people are talking about: State governments’ balanced-budget mandates. Shortfalls in tax revenue will bring large cuts in state services, a big part of the economy. “There is a real big problem coming down the pike from the perspective of state budgets.”

Not that any of this matters for Klimo’s investment strategy. If history is any guide, his fund will just stick with its winners through any worsening of the economy.

At the time of publication, Michael Brush had no positions in any stocks mentioned in this column. Brush has suggested TJX, LOW, HD and EL in his stock newsletter Brush Up on Stocks. Brush is a Manhattan-based financial writer who has covered business for the New York Times and The Economist Group, and he attended Columbia Business School. Follow Brush on Twitter @mbrushstocks.

Mark Hulbert: 4 safe and inflation-beating ways to beat those sinking yields on money-market funds

It’s possible to squeeze more yield out of the cash you are keeping on the sidelines. That’s important, because long gone are the days when you could earn even one percent from a money-market fund. In fact, yields consistently have been below 0.5% for the past decade; nowadays the average national money market fund yield is just 0.09%.

Yields are so low that mutual fund giant Fidelity Investments in March decided to close three of its money-market funds to new investors (though it recently announced that it will reopen them in the future depending on market conditions such as rising rates).

Don’t despair. Several decent alternatives are available, but first it’s important to view money-market funds on an after-inflation basis. For example, an inflation model maintained by the Cleveland Federal Reserve puts expected inflation over the next 12 months at 0.49%. That means the current average national money-market fund yield is minus 0.40% in real terms.

Second it’s a mistake to think that because money-market yields are so low, your money should be in stocks. The Federal Reserve wants you to believe that, since it hopes that by investing in risky assets, investors will stimulate the economy. But equities’ risk does not decrease just because interest rates are low. In fact, equities’ risk arguably increases at such times.

What’s left for investors between money-market funds and stocks? There are several choices to consider, each with a relatively short maturity and high quality. Any of these could be a good alternative for at least a portion of what otherwise would be given to a money-market fund:

1. Vanguard GNMA Fund: This fund

 invests in mortgage-backed securities that are guaranteed by the U.S. government. Its effective duration, according to investment researcher Morningstar, is 1.0 years, and its SEC yield currently is 1.72%. Note that unlike many fixed-income funds, this one carries what’s known as prepayment risk: If many of the mortgages owned by the fund get refinanced at lower rates, then the fund’s yield will decline.

2. Fidelity Conservative Income Bond Fund: This fund

 falls in Morningstar’s “Ultrashort Bond” category, with an effective duration of three to four months. It invests primarily in high-quality corporate bonds, more than 80% of which are A-rated or higher. Its SEC yield is 1.01%.

3. Vanguard Short-Term Investment Grade Fund: This fund

 has an effective duration of 2.45 years, according to Morningstar, and invests more than 70% of assets in corporate bonds rated A or higher. Its SEC yield is 1.43%.

4. Bank certificates of deposit:.By shopping around, you can find bank CD yields on short-term (less than 24 months) commitments that are above 1%. Bankrate is a good place to start in locating the best rates. Right now, for example, this site is showing a three-month CD with a rate of 1.0% and 12-month CDs with rates as high as 1.2%.

Remember, after-inflation return is what counts, and each of these options offers a positive real yield right now.

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com

More: High volatility is here to stay in 2020. Goldman names 31 stocks to deliver the best returns amid the turbulence

Also see: These 5 giant stocks are driving the U.S. market now, but watch out down the road

Deep Dive: This index ETF is beating the S&P 500 by excluding ‘losers’

Index-fund investors who didn’t sell into a crashing stock market in March should be pleased, as the S&P 500 has returned 1% in 2020. That’s despite a drop of as much as 30% earlier this year.

Active fund managers want to beat the S&P 500 Index
but most can’t do it because it’s difficult to pick winners and higher fees depress returns.

Will Rhind, the founder and CEO of GraniteShares, explained a passive approach that aims to beat the broader market, but not by selecting winners. The strategy of the GraniteShares XOUT U.S. Large Cap ETF

is to exclude companies with weaker growth prospects.

“We think the traditional passive approach, regardless of whether it is a good company or a bad company, is fundamentally flawed,” he said in an interview.

XOUT was established Oct. 7. Here’s how it has performed against the S&P 500 Index since then:


XOUT ranks the 500 largest U.S. companies by a fundamental scoring methodology and excludes the 250 with the weakest scores. The ETF is rebalanced each quarter and is weighted by market capitalization. Its annual expense ratio is 0.60% of assets, which seems high when compared with a ratio of only 0.09% for the SPDR S&P 500 ETF
Then again, expenses are included in the ETF’s return, shown above, and it has performed very well against the S&P 500 Index (which, of course, has no expense ratio). 

Nine months isn’t a long period to compare a fund’s performance to a benchmark. However, this period has been a roller-coaster ride, and the XOUT approach may appeal to investors who want a more focused approach to the stock market, without narrowing down to particular sectors, however hot they may be.

Rhind founded GraniteShares in 2017 after previously working at Barclays Global Investors (which started iShares and was acquired by BlackRock in 2009) and ETF Securities (acquired by Wisdom Tree in 2018).

He explained that XOUT’s analysis of the 500 largest U.S. companies encompasses seven categories, in no particular order:

  • Revenue

  • Employee growth

  • Research and development investment

  • Stock buybacks

  • Profitability

  • Earnings forecasts

  • Management score

Each company is assigned a numerical ranking, and the lowest 250 are excluded when the fund rebalances each quarter.

Will Rhind, CEO of GraniteShares.


Rhind said the scoring and rebalancing “avoid companies that are going to be disrupted, or are in secular decline.”

Five biggest companies excluded

Rhind said XOUT is “not a tech fund,” but also said technological disruption is one of the threats the ETF is trying to avoid when excluding companies. As of July 16, the information technology sector was the ETF’s largest, making up over a third of the portfolio:


The fund’s fact sheet includes updated lists of top holdings and the largest companies excluded from the fund. Rhind commented about the five largest companies excluded:

• Procter & Gamble Co.

 is the largest company currently excluded from XOUT. “It is not that the data indicate P&G is seriously amiss, merely that the company is falling into a pattern of stagnation and atrophy,” Rhind said. He cited decelerating earnings and sales expectations, based on analysts’ consensus estimates. With a very slow rate of sales growth, Procter & Gamble’s management score within the XOUT model is “18% below market average,” he said. “None of this is to say that PG’s prospects are forfeited, simply that the company is not at the vanguard of embracing digital disruption, and investors may have better options available,” he added.

• J.P. Morgan Chase & Co.

 was excluded from XOUT before the coronavirus crisis for several reasons. These included “decelerating deposit growth,” as well as share repurchases that “were funded by borrowed money, effectively, and not from free cash flow,” Rhind said. He also said expected revenue and earnings were declining.

• Rhind called Verizon Communications Inc.

“a leader at divesting human capital,” since it has been “firing over three times faster than the market is hiring.” He also cited revenue pressure, with sales “increasing, but at an anemic 0.5%.”

• AT&T Inc.

 ”is a company responding to technological change, as opposed to leading it,” Rhind said. He added that AT&T’s revenue growth was coming from its Time Warner acquisition, and that it scored low for revenue growth and that it was also shrinking its employee base.

• When discussing Coca-Cola Co.
Rhind had this suggestion for investors: “Consider the extent that sugar water provides innovation.” He also said the company’s expected earnings growth is “in the bottom 2% for the entire large-cap space.” He pointed to the coronavirus economy as a terrible problem for Coca-Cola, because of the disruption to the physical distribution of its products through restaurants, vending machines and sports facilities.

Top holdings

Rhind said for companies selected for inclusion in the XOUT portfolio, “the closest analogy is the ESG world.” Here are the ETF’s top 10 holdings:



Share of portfolio

Total return – 2020 through July 17

Apple Inc.



Amazon.com Inc.



Microsoft Corp.



Alphabet Inc. Class A



Facebook Inc. Class A



Johnson & Johnson



Walmart Inc.



Visa Inc. Class A



Tesla Inc.



Mastercard Inc. Class A



 Sources: GraniteShares, FactSet

Outside the Box: The Trump administration wants to discourage your 401(k) from including ESG investment options

Two proposed rulemakings from the Labor Department in the past eight weeks would largely gut sustainable investing options and strategies in retirement plans. These proposals would reverse the Labor Department’s 2015 and 2016 guidance while ignoring the growing consensus among academics, retirement plan fiduciaries and professional money managers that responsible companies are likely to outperform over the long haul.

The first measure, “Financial Factors in Selecting Plan Investments,” now in the late stages of the approval process, would discourage 401(k) and other qualified retirement plans from offering funds from managers that consider environmental, social and governance (ESG) factors in their due diligence.

The proposal establishes burdensome requirements for analysis and documentation around inclusion of ESG options. The Labor Department currently has no such requirements for any other kinds of funds.

Support for the measure has been decidedly underwhelming. A group of investor organizations and financial firms analyzed the more than 8,700 public comments on the proposed rule and found that only 4% of comments expressed support. Some 95% of the comments — across individuals, investment-related groups and non-investment-related groups — were strongly opposed, and 1% expressed neutral views or didn’t clearly express support or opposition.

The 30-day public comment period ended on July 30 and the Labor Department is likely to implement the proposal before the end of the year.

The second proposal, “Fiduciary Duties Regarding Proxy Voting and Shareholder Rights,” which was announced at the end of August, would restrict the ability of retirement plans to hold company leadership accountable through proxy voting. It alleges that proxy measures are onerous for public companies.

A fundamental misunderstanding

The reasoning betrays a fundamental misunderstanding of how financial professionals consider ESG criteria in their investments and how proxy voting practices enhance long-term value of investments. Because of inconsistent corporate disclosure rules, investors often file proxy proposals to receive relevant ESG information.

Both proposals represent a solution in search of a problem. They imply that investment managers and plan fiduciaries promote social goals over sound investment analysis, but proponents fail to cite a single instance that this has happened or any related enforcement actions they have taken.

Moreover, the agency doesn’t acknowledge any of the dozens of studies that demonstrate that consideration of ESG issues may lead to better investment outcomes. Morningstar found that during the stock collapse in the first quarter of 2020, all but two of 26 ESG indexes suffered fewer losses than their conventional counterparts. Studies of longer periods from Morgan Stanley and MSCI have found no financial trade-off in the returns delivered by ESG funds relative to traditional funds. Additionally, a 2018 report from the Government Accountability Office (GAO) reported that 88% of the academic studies it reviewed found a neutral or positive relationship between the use of ESG information and financial performance.

Setting aside the academic debates over ESG, the market has already spoken. As of 2018, more than one of every four dollars under professional management was invested using ESG criteria, according to the US SIF Foundation’s 2018 Report on U.S. Sustainable, Responsible and Impact Investing Trends. Morningstar has reported that in 2020, flows into sustainable funds outpaced traditional funds.

Read:Sustainable-investing flows have smashed records in 2020. What’s going on?

Far from making a concession to ESG, professional money managers increasingly analyze ESG factors precisely because of risk, return and fiduciary considerations. They know that bad policies and practices can harm companies’ reputations, affect consumers and lead to stock-price declines. Climate change is widely recognized as an environmental and financial risk for companies. Similarly, companies that fail to promote racial equity face real and meaningful challenges.

Investors are coming to recognize that companies with better policies and practices and more robust corporate governance will outperform over the long term. A 2018 US SIF Foundation survey of U.S. sustainable investment money managers with aggregated assets of more than $4 trillion found that three-quarters of the respondents employ ESG criteria to improve returns and minimize risk over time, and 58% cited their fiduciary duty as a motivation.

In 2020, flows into sustainable funds outpaced those into traditional funds.

The Labor Department’s proposals would largely supplant an existing regulatory regime that was already working. In 2015 and 2016, President Obama’s Labor Department carefully considered these issues and issued Interpretive Bulletins clarifying that fiduciaries of ERISA-governed retirement plans “do not need to treat commercially reasonable investments as inherently suspect or in need of special scrutiny merely because they take into consideration environmental, social, or other such factors.” The second Interpretive Bulletin recognized that shareholder rights, including voting proxies, are important to long-term shareholder value and consistent with fiduciary duty.

These new proposals are not taking place in a vacuum. They are part of the Trump administration’s broader effort to generate barriers to investment practices that have a focus on environmental, social or governance issues. The Securities and Exchange Commission is currently seeking to create its own barriers on this topic, including the role of proxy voting firms, fund names and shareholder rights.

By tipping the scales against consideration of ESG criteria when selecting investments and against the use of proxies to encourage better governance and better disclosure, the Labor Department proposals prevent plan sponsors from fulfilling their fiduciary obligation. It should retain current practices related to the utilization of ESG criteria and proxy voting.

Lisa Woll is CEO of US SIF: The Forum for Sustainable and Responsible Investment. Follow her @LisaWoll_USSIF. Judy Mares is former deputy assistant secretary in the Labor Department.

FA Center: This 50-year-old Vanguard mutual fund is holding its own against younger rivals

Vanguard Wellesley Income Fund celebrated its 50th birthday in July. A mutual fund being in business that long has become about as rare as couples reaching their 50th wedding anniversary, and so the fund’s longevity is noteworthy in its own right.

But, by analyzing this mutual fund’s performance, we can draw important investment lessons for the future — especially about the wisdom of the so-called 60/40 portfolio of stocks and bonds.

First, though, a walk down memory lane. Wellesley Income

 ] was created in July 1970 by the Wellington Management Co., at which a gentleman by the name of John Bogle was working. Bogle would later create the Vanguard Group of mutual funds, and the Wellesley Income fund became one of its offerings. Wellington Management continued to manage the fund.

The fund falls in the “Balanced” category, averaging about a 35% allocation to stocks over the decades and 65% in bonds. Despite therefore being rather conservative, it has produced a quite respectable 9.7% annualized 50-year return through this past July 31, according to investment researcher Morningstar. 

Over this same period, the entire U.S. stock market, as measured by the Wilshire 5000 Total Return Index, produced an 11.0% annualized return. Long-term Treasurys, intermediate-term Treasurys, and long-term corporate bonds produced annualized returns of 8.8%, 7.0%, and 8.3%, respectively.

Vanguard Wellesley Income is slightly ahead of a strategy that had a constant 35%/65% stock/bond allocation over the past 50 years and invested the bond portion in an index benchmarked to either intermediate-term Treasurys or corporate bonds. As you can see from the accompanying chart, however, the fund would have slightly lagged a hypothetical index fund portfolio that allocated the bond portion to long-term Treasurys.

Since the vast majority of mutual funds don’t even match their benchmarks, much less slightly beat it, Wellesley Income’s return puts it well-above average. In any case, it’s unfair to compare it to a portfolio of index funds, since such funds didn’t even exist in 1970. The Vanguard 500 Index Fund
  Bogle’s landmark invention, wasn’t created until 1976. According to an article in Barron’s several years ago, furthermore, the first bond index fund wasn’t created until late 1986 (the Vanguard Total Bond Market Index Fund

 ). Given that, Wellesley Income’s achievement is even more impressive.

Another way of appreciating Wellesley Income’s achievement is to focus on the attrition rate among mutual funds. I am unable to find out how many mutual funds existed 50 years ago, so I can only estimate how few of them exist today. Researchers have found that, between 1962 and 1995, the average annual mutual-fund attrition rate was 3.6%. If we assume that rate for the entire 50 years of Wellesley Income’s life, that means that just 16% of the funds that were in existence in 1970 are still around today.

Another estimate of attrition comes from S&P Dow Jones Indices. In their year-end 2019 SPIVA U.S. Scoreboard, they report that just 44.53% of all domestic funds that existed at the beginning of 2005 were still in existence at the end of 2019 — equivalent to an attrition rate of 5.25% annualized. Assuming that was the actual rate each year since 1970, only 7% of that year’s funds would still be in existence today. Regardless of which attrition rate you assume, it is clear that Wellesley Income is among a small minority.

Mixing stocks and bonds

All of this begs the question about how this 50-year old fund will perform in the future, however. Index funds are widely available now, and if the fund is so closely correlated with the long-term returns of a blended stock-bond benchmark index, you could very well ask if it’s worth the effort. Your answer will rest in part on whether you’re willing to bear the risk of lagging that benchmark in order to preserve the possibility of outperforming it.

What I want to focus on, however, is whether the 35%/65% stock/bond split pursued by Wellesley Income is out-of-date. Many argue that it is, including such investment legends as Burton Malkiel, the Princeton University economist and author of the famous book, “A Random Walk Down Wall Street.” Recently Malkiel told MarketWatch reporter Andrea Riquier that there no longer is justification for even a 60%/40% stock-bond portfolio, much less a 35%/65% split.

I’m not so sure, however. Consider a recent analysis completed by Joe Tomlinson, a financial planner, actuary and retirement researcher. He focused in particular on the impact during retirement years of moving from a 60% stock/40% bond portfolio to one that is 75%/25%. He found that, on average across thousands of simulations, this move led to a surprisingly small increase in the amount the median retiree could withdraw each year. But what that move did do was greatly expand the range of possible outcomes — from very good at one end of the extreme to very bad at the other.

One of the major implications of Tomlinson’s analysis is that increasing equity exposure may not be worth the risk. If you do, he adds, you should have a separate “solid base of secure lifetime income” with which to pay for basic needs. “Relying on stock-heavy portfolios to meet basic needs carries a lot of risk.” If you’re persuaded by this analysis, Wellesley Income may be an attractive consideration.

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com

More:Should I still use the 60/40 investing rule for retirement?

Also read: Vanguard opposes a tax on Wall Street its founder John Bogle favored — and the reason may surprise you

The Tell: Women money managers have an edge over men during the pandemic of 2020. Thank tech stocks for that

A century after winning the right to vote and in the midst of a pandemic, female fund managers are outperforming their male colleagues on Wall Street.

That is according to a team of equity strategists at Goldman Sachs, who crunched the numbers in honor of 2020, which marks the 100th anniversary of the 19th amendment’s ratification, which affirmed a woman’s right to vote. Goldman found that year-to-date, 43% of female-managed mutual funds outperformed their benchmarks on a year-to-date basis, versus 41% of funds beating their benchmarks with no female managers.

From the start of the year, up to March 28, when markets were swinging wildly on pandemic panic, Goldman found the median female-managed fund outperformed its benchmark by 50 basis points, whereas the typical fund lacking a female at the top, underperformed its benchmark by 20 basis points.

And the reason for the better performance comes down to stock picking, said chief U.S. equity strategist, David Kostin and the team:

“Men may be from Mars and women from Venus, but female-managed funds tilt toward Info Tech while non-female managed funds prefer Financials,” said the strategists. “At the stock level, female—managed funds have higher relative exposure to highfliers Amazon

and Tesla
but lower exposure to Berkshire Hathaway

Wells Fargo 
Visa, UnitedHealthcare

 and Exxon Mobil
which have underperformed those buzzier names.

Clearly, betting on tech has paid off so far this year, with the tech-laden Nasdaq Composite

up 30% versus roughly 9% for the S&P 500 and a slightly negative Dow industrials

(but it ended last week trade in positive territory). The SPDR S&P Bank ETF

and Energy Select Sector SPDR ETF

are each down over 30% year to date, representing to of the weakest sectors of the S&P 500’s 11.

Read:Now that Apple and Tesla’s stock has split, here’s what individual investors should know before they jump in

To qualify as a female managed fund, at least one third of managerial positions had to be held by women. Of the 496 large-cap U.S. mutual funds with $2.3 trillion in assets under management, 13% of the total, with $261 billion in assets exceeded that threshold. Only 14, or 3%, have an all-female fund manager team, managing just 2% of total assets. That is against 380 funds, 77% of the total, which are run by an all-male team, accounting for 57% of domestic equity mutual fund assets.

The outperformance by female-led funds seems to have something to do with the historic nature of 2020. From 2017 to 2019, Goldman found that return volatility and the Sharpe ratio, which measures the risk-adjusted returns of a fund, were even across funds run by all women, men and a mix of the two. But portfolios with more women, year-to-date, have seen stronger Sharpe ratios. After adjusting for volatility, the median all-female managed fund returned more than 2 times that of the typical all-male fund.

Males did have a slight edge when it came to outflows. The median female-managed fund saw slightly larger outflows year-to-date of around 5.7% of starting assets under management since the beginning of the year. The median fund with no female managers saw outflows of 5.5%. Meanwhile, female-managed funds oversee more than twice the assets as those without women at the helm — $1.1 billion versus $500 million.

Opinion:New bull market in stocks could last three years and produce another 30% in gains, say veteran strategist

Outside the Box: After underperforming the stock market for years, alternative energy is red hot

Clean-energy stocks and exchange-traded funds are on a tear this year, sharply outperforming the broader market and traditional fossil-fuel investments.

The clean-tech ETFs with the most powerful year-to-date rallies include Invesco Solar ETF
up 81% through Thursday; First Trust NASDAQ Clean Edge Green Energy Index Fund
up 58%; and iShares Global Clean Energy ETF
up 41%. Compare that to SPDR S&P 500 ETF Trust
which is up 1.99%, and the Technology Select Sector SPDR Fund
up 23%.

The promise of clean tech — creating energy from renewable resources — has lured investors to the space before, only to get burned. After years of underperformance is now different or are buyers once again flying too close to the sun?

Energy-market watchers say what makes today different than 10 years ago, when interest in clean tech also was hot, is that these power sources are now economically viable as subsidies fall away.

Peter McNally, global lead for industrials, materials and energy at research firm Third Bridge, says aggressive investment by utilities in renewable energy has lowered the cost of clean tech and showed it was viable at scale. Just as utilities invested in natural gas 20 years ago at the expense of coal, they are now doing the same with alternative energy.

“Clean-tech businesses are starting to stand on their own, and I think they got a big boost from the utilities,” he says.

Data from the U.S. Energy Information Administration, the statistical arm of the U.S. Department of Energy, shows as of 2019, 18% of the U.S.’s electricity generation came from alternative energy, versus 10% in 2009.

Some of the big oil majors like BP


 are taking alternative energy seriously, McNally says, pointing to BP’s announcement that it will allow oil production to decrease by 40% over the next decade while investing $5 billion by 2030 in clean tech.

“I am less cynical about the whole thing than I had been in the past (because of) big oil,” McNally says.

In 2019, 18% of the U.S.’s electricity generation came from alternative energy.

Another difference between now and then is clean tech is rallying as crude-oil flounders, says Jason Bloom, director of global macro ETF strategy at money manager Invesco.

Until a few years ago, alternative-energy prices were significantly higher than fossil-fuel prices. Users would seek alternatives when fossil-fuel prices rallied, switching back when prices fell. While the cheapest fossil-fuel generation still beats out clean-tech energy, in some areas of abundant sun and wind, unsubsidized new-generation wind and solar prices are competitive at utility scale as clean-tech prices plummeted over the years, Bloom says.

Over the past 10 years, the cost of solar panels has plunged 82%, while onshore wind costs have skidded 39% and the cost of offshore wind has fallen 29%, according to the International Renewable Energy Agency.

Solar names are leading this year’s rally, says Angelo Zino, senior industry analyst at CFRA, a research firm. He attributes some of it to investor interest in Tesla’s

electric vehicles and the ripple effect on other industries, plus increasing interest in environmental, social and governance investing. There may also be some investor bets that Joe Biden will win the White House in November and increase initiatives around clean energy, specifically solar.

The First Trust NASDAQ Clean Edge Green Energy Index Fund has Tesla as its second-biggest holding, while the Invesco Solar ETF and iShares Global Clean Energy ETF have SunRun

 as their No. 3 and No. 1 holding, respectively, according to their websites.

Biden’s platform has ambitious targets to increase renewable energy production, including establishing national goals of 100% clean energy by 2035. “You’ve got the potential with him at the helm to really accelerate a ton of the initiatives and long-term objectives of clean energy,” Zino says.

Because clean tech is a young space, investors need to brace for volatility. If a Biden presidency doesn’t occur, Zino expects the valuation of these stocks to fall back because Donald Trump won’t make renewable energy a priority.

Read:The West burns, coastlines are threatened, and Trump and Biden are too quiet on climate change, say analysts

For now, there are some limits to how much of power generation can come from renewables even at utility scale. Battery technology needs to improve so utilities can tap more stored electricity when the sun isn’t shining or the wind isn’t blowing. “They’re figuring ways to make it more reliable, but it’s not 100%,” Third Bridge’s McNally says.

But even if the U.S. slows in renewables adoption, clean tech is a global business. Europe and China are pushing ahead on adoption, which supports the industry as a whole. For example, Germany gets nearly half of its energy from renewables, according to Clean Energy Wire, citing Germany’s energy industry association.

McNally says the strength in clean-tech energy is more than just investor money inflating valuations, pointing utility NextEra Energy
the world’s largest generator of renewable energy from wind and solar power.

“The utilities themselves have made this part of their portfolio, and they are required to keep the lights on,” he says. “They’re investing real money in all kinds of ways to generate and distribute power to customers.”

Now read:Warren Buffett-backed largest U.S. solar project approved as nation’s renewable use on track to pass coal

Also:Here are two stocks that stand to benefit from California’s electric-vehicle push

Debbie Carlson is a MarketWatch columnist. Follow her on Twitter @DebbieCarlson1.

FA Center: This mutual fund may have cracked the ‘Buffett Code’ — Berkshire Hathaway’s secret sauce

For the 55 calendar years from 1965 through 2019, Berkshire Hathaway’s stock rose at an 18.6% annualized pace, versus 11.8% for the S&P 500

 . (Both returns reflect reinvested dividends.) Warren Buffett can take credit for this, and he appears to be very much in charge of Berkshire. But, given that he just celebrated his 90th birthday, it’s clear that Buffett won’t be at the helm forever.

But if you invest in Berkshire


 or by following Buffett’s well-known investing principles, your portfolio returns likely won’t suffer after Buffett stops analyzing the markets and offering his insights.

How can I be so certain? Because some years ago a group of researchers broke the Buffett Code. They devised a mechanical investing strategy that would have done every bit as well as Buffett over the long term. It is testament to Buffett’s accomplishments that it took many researchers many attempts over many years before they figured out the Oracle of Omaha’s secrets.

The researchers who succeeded were three principals at AQR Capital Management, each of whom has strong academic credentials: Andrea Frazzini; David Kabiller, and Lasse Pedersen. The study, entitled “Buffett’s Alpha”, began circulating in academic circles in early 2012. (Berkshire Hathaway did not respond to an email seeking comment about this study.)

The exact specifics of the formula the researchers derived are beyond the scope of this column. In general it focuses on what might be called “cheap, safe stocks.” The formula favors issues that have low price-to-book-value ratios, have exhibited below-average volatility, and are from companies whose profits have been growing at an above-average pace and pay out a significant portion of their earnings as dividends.

One mutual fund that perhaps comes closest to employing the formula the researchers derived is offered, not surprisingly, by AQR: The AQR Large Cap Defensive Style Fund

 . The fund’s inception was in July 2012, soon after the research was completed.

The researchers don’t expect their formula to replicate a portfolio that is identical to Berkshire Hathaway’s stock holdings, by the way. But, based on the researchers’ results, it should produce a list of stocks that are similar to those Berkshire has owned over the years — similar both in terms of characteristics as well as long-term performance.

An example is Kraft Heinz

 , which was one of the stocks the fund invested in when it was formed. At the time Berkshire Hathaway had no position in the stock. Not long after, Buffett announced that his company had acquired a 50% stake in Heinz.

That’s just one data point, of course. But since inception, the AQR fund has produced a 14.4% annualized return versus 12.5% for Berkshire Hathaway stock, according to FactSet. Both of these returns reflect the reinvestment of dividends.

It would be going too far to expect the AQR fund to continue outperforming Berkshire shares over the long term. There are major differences between the fund and Berkshire, and there inevitably will be some periods in which the fund won’t come out ahead.

But, assuming the future is like the past, the fund (as well as anyone else following the research) should at least match Berkshire’s stock performance over the long term — with Buffett or without.

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com

More:Bill Gates says this might be ‘the most important thing’ he’s learned from Warren Buffett, who just turned 90

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