The 3 Top Mutual Funds of 2019

2019 has come to a close, and the year was a great one for the stock market. Investors entered the year having seen a big drop in December 2018, prompting panic among many mutual fund shareholders. Yet those who stayed the course and stuck with their long-term investing strategies fared quite well.

With the market's gains, there were plenty of stock mutual funds that delivered strong performances in 2019. Yet the three funds below really stood out from the crowd, benefiting from their chosen investment objectives and extremely good conditions in the sectors in which they focused their attention.

Let's take a closer look to see whether these three top funds could continue to do well in 2020.

The 3 top mutual funds of 2019

Data source: Fund companies. Includes funds with assets of $750 million or more but excludes leveraged or inverse funds.

Semiconductors see light ahead

The semiconductor industry is highly cyclical, with periods of strong demand prompting expansion in capacity that then leads to supply gluts and price declines. That's where semiconductor stocks languished throughout much of the past couple of years, but things are now starting to pick up for the sector and for mutual funds such as Fidelity Select Semiconductor that invest in it.

In particular, the rise of 5G wireless network technology has led to rising enthusiasm about the semiconductor industry, which will have to ramp up to meet higher demand for new hardware that takes advantage of the new standard. Even as trade-related tensions have caused disruptions in the technology sector, investors see 5G as an unstoppable evolution that will overcome any geopolitical issues.

Image source: Getty Images.

Fidelity Select Semiconductor holds many of the largest semiconductor stocks in the world, and after having suffered through a 12% down year in 2018, nearly all of the mutual fund's top holdings having produced double-digit percentage gains in 2019. With the future looking so bright, 2019's stellar performance could be just the beginning of a new push higher for Fidelity Select Semiconductor.

Winning some big healthcare bets

Many investors see the healthcare industry as being defensive and reliable for investors, but there are parts of the sector that are much more aggressive. Those parts appeal to Eventide Healthcare & Life Sciences Fund, whose investment objective seeks long-term capital appreciation in stocks in the sector. That means Eventide gravitates more toward the smaller, riskier companies in healthcare, including those targeting unmet medical needs along with rare and orphan diseases.

Betting big on small companies in the biotech and pharmaceutical sector has produced some substantial wins in 2019. Among Eventide's top 25 holdings, fully six have doubled, including a rare triple from Mirati Therapeutics and its experimental cancer drug. The fund has also had extraordinarily good luck, with just a couple of losing stocks among its largest investments.

Larger healthcare stocks have been under pressure from fears about regulation, but small companies tend to live or die based on their successes and failures in coming up with useful treatments. That's where Eventide has concentrated its efforts, and it could see further gains if those small biotech and biopharma players can keep delivering the goods in 2020.

All that glimmers

Finally, 2019 was a great year for gold, and Franklin Gold & Precious Metals found itself in the right place at the right time. All 10 of its top holdings produced gains of 30% or more, including three stocks that doubled in price.

Overall, rising prices for gold and other precious metals helped buoy mining stocks. Fears about tariffs and trade-related tension led many investors to seek the safe-haven status of gold, which created more favorable fundamental business conditions for miners.

2019's gains came after a bad year in 2018 for the fund, and Franklin Gold & Precious Metals has had to deal with declines in three of the past six years. Yet for those seeking the diversification precious metals can bring, the fund is worth a closer look for 2020 and beyond.

Watch these funds in 2020

Investors can't expect funds to deliver huge gains year in and year out. But if the same positive factors that helped produce their strong returns in 2019 continue into the new year, then fund shareholders could see even more gains in the future.