By Ian Salisbury

With the stock market gyrating wildly, it's a portfolio manager's job to guide investors through the chaos. While it isn't easy, plenty of mutual funds that invest in quality stocks -- and conservative sectors like healthcare and utilities -- have done a pretty good job.

As President Donald Trump's tariff war roils Wall Street, it's hard to believe the S&P 500 index hit a record just two months ago, on Feb. 19. Since then, the index has plunged close to bear market territory before snapping back somewhat. It's now about 12% below its February all-time high.

To find out which mutual funds have done the best job sheltering investors from the storm, we asked fund researcher Morningstar to create a list of the top-performing large-cap U.S. stock funds from Feb. 19 to April 11.

The good news: Plenty of funds found ways to blunt the selloff. Returns among the top 10 performers ranged from a gain of 17% to a loss of just 3.9%, accomplished by keeping investors out of the riskiest corners of the market.

But it's also worth noting there is no free lunch. Funds that shined the most during the recent selloff aren't necessarily long-term outperformers. In fact, only one fund in our top 10 managed to outreturn the Vanguard 500 Index fund over the past five years.

The list's top performer, Forester Value -- which gained a remarkable 17% since Feb. 19 -- was something of an outlier. The next best fund posted a decline of about 2.6%. Portfolio manager Tom Forester, who has run the tiny $4 million fund for more than 25 years, sees it as a way for conservative investors to protect their capital while still staying invested in the stock market. "When the market gets a little dicey, like it is now, we're a great place to be," he says.

Stellar recent returns are due in part to Forester's strategy of buying index put options, which pay out when stocks fall in value, as well as a big allocation to Treasury bills, which represent about 19% of the portfolio.

He also picks stocks. Among his largest holdings are Alamos Gold and Agnico Eagle Mines, two gold miners that have benefited from the metal's historic surge, and insurers like Allstate, Chubb, and Travelers, which are less interest-rate sensitive and have an easier time raising prices than banks, he says.

While acknowledging the market could bounce off recent lows, Forester thinks stocks have further to fall. "The market is still extremely overvalued," he says. "They say they're going to be cutting the deficit. OK, well, that's one of the things that has propped up the market....You start taking away from the deficit, you start taking away from the free cash flow of the companies. We expect earnings to struggle."

Forester's extreme defensive stance means the fund acts like an insurance policy. It was also a standout in 2022, when it returned 12% in a market that was down 18%. And it earned the distinction of being the only fund among 2,800 names in Morningstar's diversified equity category to eke out a positive return in 2008, when it was up by 0.04%.

The big drawback is that Forester Value tends to dramatically lag behind the market in up years. Over the past decade, its average annual return is just 0.3%, ranking it in the 100th percentile among large-cap value funds in Morningstar's database.

Most other funds on the list offer similar, if less extreme, trade-offs. The funds tended to be overweight in recession-resistant stocks such as consumer defensives and especially healthcare, a sector that not only tends to hold up well when consumer spending slows but is also likely to enjoy relatively little fallout from any trade war.

Coho Relative Value Equity has about 30% of its portfolio in healthcare stocks such as Cencora and UnitedHealth Group, according to Morningstar. Castle Tandem has 23% in healthcare, and Fidelity Blue Chip Value, 20%. By contrast, healthcare represents only about 11% of the S&P 500.

Write to Ian Salisbury at ian.salisbury@barrons.com

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April 18, 2025 21:30 ET (01:30 GMT)

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