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Stellar returns, but 'easy money's been made'

WHAT ARE WE LOOKING FOR?

High fliers among natural resource funds.

Base metal and energy stocks have enjoyed a new lease on life this year, fuelled by signs of an economic recovery. Gold stocks have also glittered amid a falling U.S. dollar and fears of inflation.

TODAY'S SEARCH

We screened for the top 30 best performers among natural resource funds this year to this past Thursday. Segregated and pool funds were excluded, as were the U.S. dollar and duplicate versions of funds listed here.

WHAT DID WE FIND?

Eye-popping, triple-digit returns in four funds.

They include Mavrix Explorer, Investors Canadian Natural Resource, Front Street Special Opportunities Canadian and Dynamic FocusPlus Resource.

Keep in mind the returns are off a low base after the sector got creamed last year. Unlike hedge funds, however, these investments didn't need to resort to leverage to get their returns.

While smaller funds (including all series) are more nimble and able to crank big numbers, it looks like bigger funds are able to do so too.

The $65-million Mavrix Explorer Fund has soared 178 per cent this year, while the $670-million Investors Canadian Natural Resource Fund has surged 127 per cent.

"A V-shaped recovery led by China" is driving the resource sector, says Paul MacDonald, manager of Mavrix Explorer. And the sharp increase of imports of basic materials like copper and iron ore in September by that country was a "surprise," he adds.

Resource stocks tends to be most levered to the early stages of a recovery, but consumer cyclicals, technology and industrials can also give "equal if not better returns," he says.

Teck Cominco Ltd., FNX Mining Co. Inc. and Petrobank Energy and Resources Ltd. were among his winners this year. But there may also be some serendipity in Mavrix Explorer's stellar return.

"When you outperform your peers by that much, there has to be a little luck too," Mr. MacDonald concedes. "There have been some takeovers that we didn't expect."

So is it still wise to jump into the sector now?

"The easy money has no doubt been made, but on a go-forward basis the next 18 months still look good," he says. "But I don't think it is reasonable to expect similar performance."

For those who have made money, "it's not a bad time to take some profits," while nervous investors may want to get into the sector gradually through dollar-cost averaging, he adds. "Everyone is waiting for the proverbial pullback that may or may not come."

******

Top 30 Natural Resource Funds as of October 22, 2009
(As of Sep. 30)Latest(Oct. 22)(Sep. 30)Calendar year % returns
Fund name Assets ($-mil)MERYTD % rtnYTD % rtn2008200720062005200420032002
Mavrix Explorer7.83.15177.5152.6-67.18.19.8-12.54.168.9
Investors Cdn. Natural Resource-C670.12.87126.7109.6-49.73.73.752.311.916.49.7
Front Street Special Opp Canadian-B151.02.82122.4108.1-46.38.022.546.819.3121.214.5
Dynamic FocusPlus Resource490.02.53108.596.7-50.714.358.734.919.442.625.3
TDK Resource Fund Inc.29.83.8981.170.9-47.7-5.049.551.622.444.537.7
DMP Resource Class232.92.6379.972.1-57.2-5.144.340.47.550.425.4
Ark Catapult Energy Class Series A76.757.4
FrontierAlt Resource Capital Cl-A4.872.751.2-72.7
Mackenzie Univ Wld Resource Class132.12.5066.453.9-62.132.323.627.322.830.36.4
Manulife Global Natural Resources11.12.4666.355.1
Mackenzie Univ Canadian Resource1,276.52.4365.956.5-56.224.718.335.521.143.827.0
CIBC Canadian Resource84.02.5064.756.0-51.513.416.452.513.628.18.9
Investors Glo Natural Resource Cl-A269.32.8462.250.6-44.423.533.238.217.818.3
Stone & Co. Resource Plus Class A17.92.9762.253.5-54.0-12.14.5
Claymore Oil Sands Sector ETF37.80.6061.947.9-54.222.7
Renaissance Global Resources23.73.2161.653.1-46.018.816.051.310.528.2
Sprott Energy97.02.8559.349.8-64.517.96.142.4
AGF Global Resources Class141.53.0158.949.9-31.416.431.036.622.233.29.5
AGF Canadian Resources275.72.9155.646.9-50.22.129.744.119.543.318.0
Ark Aston Hill Energy Class55.544.6
Scotia Resource123.12.3355.245.9-44.69.325.440.317.342.318.3
Front Street Resource-A3.73.5154.947.5-56.422.7
Sentry Select Cdn Resource Class161.92.8152.343.3-51.6-2.28.745.522.939.515.7
Bissett Energy CC-F0.51.4252.342.3-43.8
CIBC Energy162.62.4451.446.7-38.2-3.62.354.746.827.525.0
TD Resource196.22.1550.242.1-48.714.419.940.59.634.922.0
Acuity Natural Resource44.62.9545.637.0-45.222.2
EnerVest Natural Resources Fund Ltd24.02.9545.237.8-50.9-17.5-17.050.235.823.938.2
NexGen Global Resource-CG0.02.6243.937.2
RBC Global Resources224.02.1643.734.4-49.533.448.136.717.226.92.6
S&P/TSX Capped Energy41.033.5-38.27.91.559.728.723.611.3
S&P/TSX Capped Materials31.025.9-27.129.138.013.95.725.85.4
S&P/TSX Composite Index28.326.8-35.07.214.521.912.524.3-14.0
Source: Globe Investor

© 2007 The Globe and Mail. All rights reserved.

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