In Sickness and in Health, These Growth Funds Have Delivered

If this year has been a wake-up call for growth fund investors, this past week's selloff was like having an air-horn blaring under your pillow.

Things were already bad when we got out of bed Monday morning, with many of last year's tech-heavy highflying funds well underwater. But another round of earnings warnings and violence in the Middle East have made a tough year even worse. From last Thursday to this Thursday, the average large-, mid-, and small-cap growth fund lost more than 8%, according to Lipper. The average telecommunications fund tumbled 12.7%; the average tech fund fell 11.8%.

No one could blame you for ignoring the market these days or starting to investigate lower-octane, core bond funds. But what if you're still a growth investor at heart? This week's Big Screen is for you. This week, we sifted the large-, mid-, and small-cap growth fund categories for successful funds that have weathered market dips in the past.

We screened each category for funds that have beaten their average peer since Jan. 1, as well as over the last one-, three-, and five-year periods, according to Morningstar. Then we removed the funds that fared worse than their average peer in significant market dips -- defined by Morningstar as months in which the S&P 500 lost more than 3%. We've singled out the top-five funds in each pack, ranked by their year-to-date return, and we'll consider how they did in 1998's third quarter -- the toughest calendar quarter for growth funds in the last five years.

Living Large These big-cap growth funds have posted strong returns in good times, and held up in tough years.
Fund	YTD Return	5-Year Annualized Return
(SHRAX Quote)Smith Barney Aggressive Growth	14.9%	29%
(EAGYX Quote)Evergreen Aggresssive Growth	10.5	21.9
(BSSPX Quote)Bear Stearns S&P Stars	9	26.4
(AGWFX Quote)AIM Select Growth	8.4	22.5
(AGTHX Quote)Growth Fund of America	7.8	25
Avg. Large-Cap Growth Fund	-7.7	20.4
Source: Morningstar. Performance figures through Oct. 12.

Oddly, the five top large-cap growth funds we turned up are all broker-sold. Perhaps the most intriguing is the $40.7 billion (AGTHX Quote)Growth Fund of America, the 10th-largest stock fund in the nation. It's managed by quiet giant American Funds.

The fund's conservative tack -- favoring infrastructure stocks over dot-coms, for instance -- has helped it post solid risk-adjusted returns. Of the top five, this fund held up best in 1998's third quarter, losing 9.5% compared with more than 12% for the average big-cap growth fund.

Do-it-yourselfers might consider the no-load (NOEQX Quote)Northern Select Equity, (FDGRX Quote)Fidelity Growth Company or (FLRFX Quote)Invesco Blue Chip Growth funds. Each made the cut, but their year-to-date returns didn't rank in the top five.

Mighty Middles These mid-cap growth funds notched strong results this choppy year, and in better times.
Fund	YTD Return	5-Year Annualized Return
(CVGRX Quote)Calamos Growth	29.2%	38.9%
(SCFIX Quote)Seligman Capital	23.3	28.8
(BRAGX Quote)Bridgeway Aggressive Growth	22.9	40.5
(FMCSX Quote)Fidelity Mid-Cap Stock	22.3	25
(SNTNX Quote)Sentinel Mid-Cap Growth	21.4	26.8
Avg. Mid-Cap Growth Fund	0.7	20.9
Source: Morningstar. Performance figures through Oct. 12.

Among the mid-cap funds we've turned up were a blend of broker-sold and no-load funds. The broker-sold trio -- (CVGRX Quote)Calamos Growth, (SCFIX Quote)Seligman Capital, and (SNTNX Quote)Sentinal Mid-Cap Growth -- were all below the category's average 20.6% loss in the third quarter of 1998. The fund that did the best job staying out of the soup was Sentinel Mid-Cap Growth, which gave up just 13.4%.

Among the two no-loads on this list, (FMCSX Quote)Fidelity Mid-Cap Stock and (BRAGX Quote)Bridgeway Aggressive Growth, the Fido fund lost less in the third quarter of 1998 -- 17.2% compared with an above-average 23.3% loss for its competitor. A notable no-load fund that would have made our list if its year-to-date return was higher is (FIDYX Quote)Invesco Dynamics, one of this year's top-selling funds and also one that's consistently beaten its peers over the past 10 years.

Small-Cap Stalwarts These small-cap growth funds have posted outsize returns through thick and thin.
Fund	YTD Return	5-Year Annualized Return
(GCBLX Quote)Green Century Balanced	24.1%	24.9%
(WMICX Quote)Wasatch Micro Cap	23.8	26.7
(TEGAX Quote)Touchstone Emerging Growth	15.4	20.5
(FRMPX Quote)Firstar MicroCap	13.9	38.2
(WAAEX Quote)Wasatch Small Cap Growth	9.1	17.2
Avg. Small-Cap Growth Fund	-3.1	16.2
Source: Morningstar. Performance figures through Oct. 12.

At the top of our small-cap growth list, we find what might be called an "extreme" fund. The no-load (GCBLX Quote)Green Century Balanced fund owns high-octane, small-cap stocks and bonds, which made up 25% of the portfolio at the end of August. If you're looking for access to small-cap growth stocks with a bond cushion, you might consider this fund. That said, its bond stake hasn't been a cure-all. It lost 22% in 1998's third quarter, less than the average small-cap growth fund's 25.3% tumble, but still a steep dip.

No-load (WMICX Quote)Wasatch Micro Cap -- currently closed to new investors -- also has a cushion, in the form of a 17% cash stake at the end of last month. The same firm's (WAAEX Quote)Small-Cap Growth fund -- open to new investors -- also made our list. That fund also had a sizable cash stake, 11%, at the end of September. In the third quarter 1998, the Wasatch Micro Cap lost 21.1%; the Small-Cap Growth fell 23.8%.

There you have it -- a short list of growth funds you might want to consider if you're looking for a slightly less bumpy road.