Two Growth Funds That Shrugged Off the Poor Decade
The past 10 years knocked many large-growth funds down for the count, but these two came out swinging.
Large-growth funds' returns haven't looked bad in the past year, but their 10-year results are still downright ugly. The group is down almost 2% annualized for the decade versus large value and large blend's respective 3% and 1% gains. That's because large growth suffered more than other big-cap funds during the decade's two bear markets and the 10-year period now excludes large-growth stocks' late-1990s' glory days.
Some funds deftly navigated the decade, though. You can find them in just a few steps with the Premium Screener. To begin, focus on reasonably priced large-growth funds that are open to new investment. Next, set the screen to pull funds that gained at least 3% annualized, or more than the typical large-value fund, over the decade. Also limit the field to managers with tenures of 10 years or more to ensure current management is responsible for the performance.
Lastly, screen for funds with a Best Fit Index R-squared of 80 or above to help eliminate funds that haven't stayed firmly rooted in large-growth territory. (Morningstar designates the Best Fit Index as the one that shows the highest correlation with a fund over the most recent 36 months, and R-squared measures the percentage of a fund's movements explained by the movements of this index, with 100 indicating that they're perfectly in sync.)
As of May 3, 2010, the screen turned up two funds. To run it yourself, click here.
When he took over Fidelity Contrafund (FCNTX) in 1990, Will Danoff focused on small caps and mid-caps. More than a decade ago, Danoff began venturing into larger fare to accommodate the fund's growing asset base, and it has been firmly planted in large-growth territory ever since. Danoff looks for mid- and large-cap companies with strong and improving earnings. Although the fund has owned between 300 and 600 stocks over the past decade, Danoff adroitly uses Fidelity's army of analysts to keep tabs on them all. And he's found that staying on top of smaller firms helps guide his stock-picking among the industry titans that grab larger positions in this portfolio. The fund's 3.8% annualized 10-year return is a result of deft stock-picking and portfolio construction.
T. Rowe Price Spectrum Growth (PRSGX) is different, but just as intriguing. The fund of funds owns 11 T. Rowe Price funds, including small-cap and value-focused offerings, but has retained a large-growth tilt thanks to big helpings of T. Rowe Price Growth Stock (PRGFX) and T. Rowe Price Blue Chip Growth (TRBCX). The fund provides access to some of the firm's best offerings, four of which are Analyst Picks. Its asset-allocation committee of veteran managers also has added long-term value by shifting assets among the funds. It landed in the top quartile in every calendar year of the past decade except for 2008, and its 3.4% annualized return over the past 10 years topped more than 97% of its peers.
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Karin Anderson does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.