This Day On The Street
Continue to site
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

3 Large-Cap Funds Offer Solid Growth

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

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $95.18 1.60%
FB $117.44 -0.95%
GOOG $692.33 -0.84%
TSLA $232.12 -4.00%
YHOO $36.02 -1.40%


Chart of I:DJI
DOW 17,750.91 -140.25 -0.78%
S&P 500 2,063.37 -18.06 -0.87%
NASDAQ 4,763.2240 -54.37 -1.13%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs