This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

3 Large-Cap Funds Offer Solid Growth

Stocks in this article: BUFGXTGCEXPRWAX

NEW YORK ( TheStreet) -- For much of the past decade, small-cap stocks have outperformed large caps. But that could be changing. During the past three months, small growth funds lost 17%, lagging large growth by six percentage points, according to Morningstar. Can large stocks continue outpeforming? Yes. Large stocks are cheaper than small ones. And big stocks tend to excel when markets face the kind of uncertainty that now plagues investors.

With markets favoring companies that can grow in a harsh time, large growth funds have been standouts this year, outdoing large value by a percentage point. To benefit from a revival of large stocks, consider buying a top large-growth fund. Strong choices include Buffalo Growth (BUFGX), TCW Select Equities (TGCEX), and T. Rowe Price New America Growth (PRWAX).

In the first quarter, large stocks lagged as investors bet that shakier small stocks would benefit from an economy that seemed to be gaining momentum. Then in the spring, economic indicators turned sour. Worried that unemployment could surge again, investors sought safety in big blue chips. When small-cap funds turned down in May, large-cap funds lost less, and they have held their lead since then.

>> Get your mutual funds news on the go with TheStreet's iPad app.

Even after a period of outperformance, large caps look like relative bargains. The stocks of the Russell 1000 large-cap index sell for a price-earnings ratio of 14.8, while the Russell 2000 small-cap benchmark has a multiple of 18.1. In the past, small stocks have often sold for a minor premium, but the current 22% premium is unusual. In 1993, the Russell 2000 sold at a 10% premium. Then large stocks began to soar. By 2000, the small-cap benchmark was at a 40% discount.

While they have relatively low multiples, large stocks have reported superior earnings gains as booming sales in emerging markets have boosted multinational giants. During the past five years, earnings of stocks in the Russell 1000 have been growing at an annual rate of 6.3%. In contrast, earnings of the Russell 2000 have climbed at a rate of 3.4%.

Let's take a closer look at all three funds mentioned above.

TCW Select Equities

Among the steadiest large growth funds has been TCW Select Equities. The fund ranks as one of the few to outperform most competitors during both the downturn of 2008 and in the rally of 2009 and 2010. Portfolio manager Craig Blum has shined by holding a mix of stocks that includes defensive all-weather performers as well as growth stars that soar when the market climbs. Blum prefers companies that can prosper for years because they have sustainable advantages. After he buys, he holds for several years. The fund has an annual portfolio turnover rate of 24%.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,827.75 +12.81 0.07%
S&P 500 2,072.83 +5.80 0.28%
NASDAQ 4,787.3170 +29.0650 0.61%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs