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Chinese, Other Foreign Stocks Drove Top Q3 Mutual Fund Performers

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The best performing big mutual funds in the third quarter were boosted by foreign stocks, especially China equities.

World equity stock mutual funds outgunned U.S. diversified stock mutual funds , 6.42% vs. 4.80% on average. And China region funds paced all foreign stock fund groups, gaining 11.36%.

Among the 25 largest mutual funds, $126.29 billion American Funds EuroPacific Growth ( AEPGX ) was the top performer with an 8.14% gain, according to Lipper Inc. Eighty-eight percent of its shareholders' money was at work in foreign stocks as of June 30. That's mostly divided between European and Asian equities, with a 43% and 39% split.

Seven percent of the fund is in China names, which also were among the top contributors to fund performance in the quarter. Hong Kong-based financial firm AIA Group, which provides insurance, savings and investment services, gained 11%.

Alibaba Group ( BABA ) is another holding. The internet retail giant soared 33% during the quarter. It got a big boost when it posted first-quarter earnings growth of 25% in August -- reversing a fourth-quarter decline of 4%. Its first-quarter results beat Wall Street analysts' consensus estimates and showed strong growth in mobile and cloud computing.

IBD'S TAKE:Top-notch Hartford Growth Opportunities Fund manager Michael Carmen spells out why he likes Alibaba in this question-and-answer report in IBD.

Investors in EuroPacific Growth also benefited from its non-China foreign stocks, including HDFC Bank ( HDB ). The bank holding company, which is based in Mumbai, India, rose 8% in the third quarter. The company has posted a pretax margin above 26% for three straight years.

The $221.48 billion Vanguard Total International Stock Index Fund ( VGTSX ), second best performing fund, had 96% of its shareholders' money at work in foreign stocks as of July 31.

Tencent Holdings ( TCEHY ) was a top contributor, jumping 21%. Earnings have grown 16%, 27% and 36% the past three stanzas. The China messaging giant trades over-the-counter in the U.S.

Still, not all of the top-performing big funds were focused on foreign stocks. The $145.69 billion Growth Fund of America (AGTHX) gained 6.47% in the third quarter. It was the third-best performing among the biggest funds. But it had only 11% of its shareholders' money in foreign stocks as of June 30.

Top holding Amazon (AMZN) climbed 17% in the third quarter. The internet and cloud-computing giant has posted triple-digit earnings growth for five straight quarters.

EOG Resources (EOG) was another big contributor. Light sweet crude oil rose 23% to a price above 48 by quarter's end from below 40 on Aug. 3. That helped fuel EOG, an exploration and production company, up by 16% in the quarter.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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