Growth-Fund Managers Take Different Tack

For the moment, Pioneer is taking companies with little or no growth. To find future winners, McVicker looks for companies that were growing steadily before the recession. He targets profitable businesses with secure niches that seem likely to resume growing when the economy rebounds.

McVicker is optimistic about seeing better returns someday because many stocks now seem like bargains. In the past, he often bought shares selling for multiples of two times their earnings growth rates. So if a high-quality company was growing 15%, he might accept a price-to-earnings ratio of 30. Now that prices have collapsed, he can find similar stocks selling for multiples that are one time the long-term projected growth rates.

A top Pioneer holding is Waste Connections(WCN Quote), which operates landfills and recycling operations in Western states. McVicker figures that sales could drop a bit during the recession. But the business will remain sound because people must dispose of garbage in good times and bad.

Like the Pioneer fund, RidgeWorth Small Cap Growth(SSCTX Quote) is making adjustments. From 2003 to 2007, RidgeWorth followed conventional growth strategies, buying companies that were gaining market share and exceeding Wall Street's earnings forecasts.

Then as trouble appeared in late 2007, portfolio manager Chris Guinther switched gears, moving away from consumer and industrial shares. He began buying defensive names that could hold up during a recession, including reliable health-care and software companies with stable franchises. "When it became clear that there was going to be significant economic turmoil, we began rotating to more resilient names that have recurring sales from longtime customers," he says.