Nuveen Tradewinds Digs Materials

• Paul Katzeff
• On 6:08 pm EST, Tuesday November 10, 2009

Nuveen Tradewinds tries to make hay with other investors' mistakes. And it has the leeway to do that in a lot of fields.

It can make big sector bets. It can buy a lot of foreign stocks. It can gobble lots of convertible bonds.

"The market isn't always efficient," said David Iben, manager of the $1.5 billion fund (NASDAQ:NVOAX - News). "We've got freedom to buy growthy stocks and converts (convertible securities) at value prices in a lot of places."

Industrial materials make up the fund's biggest sector, at 29% of assets as of Sept. 30.

"In recent years the market was looking at present cash flow, less at future cash flow," Iben said. "So we could buy copper, gold, uranium and other materials cheaply. They were still in the ground, not producing cash flow."

Gold stocks alone make up about 22% of assets now. Iben says that his play was based on being able to buy mining stocks with growth potential at attractive valuations. It was not a hedge against the rest of the market or the dollar.

The fund holds 10 gold miners. Returns this year going into Tuesday range from 5.37% for Kinross Gold (NYSE:KGC - News) to 264.63% for NovaGold Resources (AMEX:NG - News).

Gold Fields (NYSE:GFI - News), a top holding, is up 47%. Iamgold (NYSE:IAG - News), a top buy as of the fund's latest disclosure, is up 185%.

Bullion has climbed 27% this year.

The fund's foreign stock weighting was a beefy 32.2% as of Sept. 30.

In addition to gold stocks, that stems from names like paper producer Domtar (NYSE:UFS - News), up 151% this year, and uranium miner Cameco (NYSE:CCJ - News), up 73%.

The fund acts differently from most of its rivals in other ways too. Its latest annual turnover rate was a miserly 61%. The average for all U.S. diversified stock funds is 101%.

The fund's latest disclosed weighting in convertibles was 8.41%. That's about half its peak weighting in Q2 '05.

"It's an extension of our process for pricing common stock," Iben said. "From time to time we find converts mispriced more than stock. So it's an opportunity to get equitylike returns with less risk."

Eclectic Fund

Iben calls this an eclectic approach. It has led to a 49.72% gain this year, going into Tuesday. Its midcap blend rivals tracked by Morningstar are up an average of 32.54%. The S&P 500 is up 23.58%.

The fund has topped its peers and the S&P 500 each calendar year since inception.

Over the past three years, the fund's average annual return was 4.87% vs. -4.61% for its peers and -5.36% for the S&P 500.

In the sharp downturn last winter and fall, Iben could buy eBay (NasdaqGS:EBAY - News) for the price of its PayPal online payment service alone, he says.

The online auctioneer is fighting to get back above its 10-week moving average. It had fallen 17% off its Oct. 21 high, but had regained nearly half of that going into Tuesday. That left the stock up 67% for the year.

Microsoft (NasdaqGS:MSFT - News) was a similar story.

"Ten years ago it was selling for $600 billion," Iben said. "Who could imagine it would get down to $150 billion last winter?"

The stock is up 49% this year. It recently released its Windows 7 operating system.

Earnings per share contracted the past four quarters, though EPS beat analyst estimates in the latest period. Analysts polled by Thomson Financial forecast growth for at least the next four quarters.

Health Net (NYSE:HNT - News), another top holding, is up 65% this year.

It earned 67 cents a share in Q3, up 91% from a year earlier and above analysts' consensus estimate of 61 cents.

Going For The Discount

Uncertain about the impact of the federal health care overhaul, investors have hammered managed health care companies like Health Net.

"We don't know what the legislation will be or its impact," Iben said. "But because of all the fear, we've been able to buy it at a big discount to where it was."

Buzz up!