Hartford Capital Appreciation Shines

It isn't easy following in the footsteps of one of the best funds around. But (HCTAX)Hartford Capital Appreciation II (HCTAX) is certainly off to a great start.

Since it was launched just under two years ago, the fund has returned 41%. Not only is that nearly twice as good as Wall Street over the period -- it's even beating the original fund, (ITHAX)Hartford Capital Appreciation I (ITHAX), by a small margin.

Both funds are managed by Wellington, the blue-chip and extremely private Boston investment partnership. Capital Appreciation I -- which I have in my 401(k) plan -- is run by Wellington veteran Saul Pannell. Its younger sister is divided into five slices, each run independently by a separate sub-manager. Pannell is one. But the biggest slice -- $150 million of the fund's $500 million -- is run by eight-year Wellington manager Michael Carmen.

So where is he putting that money to work? Carmen says that when he's looking for investment ideas, he tries to find what he calls "accelerating tangible operating momentum." That means accelerating revenue growth and widening profit margins.

"There are a couple of sectors I like right now," Carmen says. "One is health care. I'm more excited about large-cap pharma than I have been for a number of years. We're seeing better product portfolios, we're seeing a lessening of patent expirations, and, most importantly, we're seeing a better pipeline of new drugs."