Slow Growth Stocks Haven't Stalled These Two Funds
Find out which large-cap funds shone last year despite an emphasis on blue chips.
Morningstar divides most stocks into eight categories, each of which defines a broad category of investment characteristics. For example, stocks in the slow growth category have shown slow revenue and earnings growth (typically less than the rate of GDP growth) over at least three years. By comparison, classic growth firms exhibit stronger growth in earnings and revenues and typically pay a dividend. While stocks from these categories generally lagged their cyclical and speculative counterparts from the March 9, 2009, market bottom onward, not all funds focused on these areas sat on the sidelines.
In a handful of steps, the Premium Screener can uncover funds that turned what appeared to be a disadvantage last year into an advantage and that sport other attractive qualities to boot. First, the screen zeros in on large-cap stock funds with more exposure to classic and slow growth firms than the S&P 500 Index, using Vanguard 500 Index Investor (VFINX) as a proxy. It's set to pull funds that placed within the top third of their respective categories last year, and in order to limit the list to long-term winners, it narrows the field to offerings with top-quartile category rankings for the trailing 10-year period with manager tenures of at least 10 years. Turnover is set below the category average in order to point to a longer-term focus on slower-growing stocks. Lastly, the field is limited to reasonably priced funds that are open to new investments of $25,000 or less.
As of Feb. 2, 2010, the screen turned up just two funds. To run it yourself, click here.
Karin Anderson does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.