Some Growth Funds That Take a Low-Tech Approach

It's deja vu all over again.

Investors rejoiced in 2003 as the Nasdaq rose 50% and the S&P 500 climbed 33%. Money poured into growth funds: Large-cap growth funds topped the list of inflows in 2003, with $42.4 billion in net new money, according to AMG Data Services. Small-cap growth funds took in $24.4 billion, the third highest category for inflows.

Once again, though, investors seem to have confused the terms "technology" and "growth" -- the former is a subset of the latter, not a synonym. "It's not a prerequisite of growth funds to be invested heavily in technology," says Jeff Tjornehoj, an analyst at Lipper, a Reuters company. "All the headlines of 1999 notwithstanding." And now that technology is flagging in early 2004, investors are left scurrying for other options.

Here they are.

The following are a few domestic growth funds that are not excessively weighted toward technology. All keep their technology stake near 25%; slightly above the S&P 500's 21%. They all boast impressive long-term records, good management and expense ratios that are at or below the category's average. Whether you're looking for a large-cap, mid-cap, or small-cap fund, below we have a suggestion. (All data comes from Morningstar.)

(TRBCX)T. Rowe Price Blue Chip Growth routinely lands on "best funds" lists of all sorts. Managed by Larry Puglia since its 1993 inception, the fund takes a more sober view of growth stocks, choosing companies that are market leaders, generate a lot of free cash flow, have high returns on invested capital and also sport reasonable valuations. That leads Puglia away from riskier technology companies, and more toward established ventures such as Microsoft(MSFT), Cisco(CSCO) and Vodafone(VOD) (all in the top 10 holdings as of Sept. 30).

Growth stocks in other sectors are better represented here than in almost any other fund of its caliber: Puglia has big stakes in UnitedHealth Group(UNH), American International Group(AIG), First Data(FDC) and General Electric(GE). The fund had a rough time in 2001 and 2002, trailing the S&P 500 by 2 percentage points each year (although beating 75% of its peers), but it has capitalized nicely on the rebound of 2003, returning 29.75%.