The Daily Screen: The Best Large-Cap Growth Funds

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Large-cap growth funds have cooled off, but they haven't exactly gone cold.

Today the Daily Screen zeroes in on the largest U.S. stock fund category with more than $530 billion -- more than twice the amount of cash invested in S&P 500 index funds. By and large, these funds buy the stocks of big, well-known companies that are growing their earnings at a faster clip than their peers and/or the market.

Big-cap growth funds have ridden an average 40% tech-stock bet to outsize returns in recent years. In 1999, for instance, the average large-cap growth fund posted a 39.8% return, compared to 21% for the S&P 500, according to Morningstar.

Though their sizable tech bets have dragged these funds down this year, they haven't suffered too badly, relative to the S&P 500, which is underwater, too.

Mirror, Mirror Large-cap growth funds have mirrored the broader market fairly closely.
	Avg. Large-Cap Growth fund	S&P 500
YTD Return	-1.4%	-1.9%
1-Year Return	16.7	7.2
5-Year Return	21.5	21.3
10-Year Return	19.5	19.1
Source: Morningstar. Annualized performance figures through Nov. 6.

If you're looking for a solid large-cap growth fund, we've sifted the category for funds that beat their average peer over the past one- and three-year periods. We've also screened those leading funds' holdings to figure out what stocks drove their returns. But first the funds, here are our top-10 outperformers, ranked by their one-year returns.

Leading Large-Cap Growth Funds These large-cap growth funds have delivered as advertised - growing much faster than the broader market during the past three years.
Fund	1-Year Return	3-Year Annualized
(BFOCX)Berkshire Focus	107.7%	81%
(PBHLX)PBHG Large Cap Growth	69.1	38.1
(PLCPX)PBHG Large Cap 20	64.1	55.3
(TAGAX)Touchstone Aggressive Growth	60.8	33.1
(SHRAX)Smith Barney Aggressive Growth	59.4	39.3
(TGVFX)Touchstone Growth/Value A	55.3	36.8
(FDFFX)Fidelity Retirement Growth	50.2	31.3
(SGRTX)Strong Growth 20 Inv	49.6	45.3
(WOGSX)White Oak Growth Stock	45.9	37.6
(FDGRX)Fidelity Growth Company	45.3	35.2
Avg. Large-Cap Growth fund	16.7	21.8
S&P 500	7.2	17.6
Source: Morningstar. Annualized performance figures through Nov. 6.

Let's just say we're looking at a tech-heavy list. These funds average a whopping 57% tech-stock weighting. All of these funds -- many of which follow a focused strategy with just 20 or so holdings -- take an even more aggressive stance than most of their competitors.

It's probably no mistake that the list includes funds from Fidelity ((FDFFX)Fidelity Retirement Growth and (FDGRX)Fidelity Growth Company), PBHG ((PBHLX)PBHG Large Cap Growth and (PLCPX)PBHG Large Cap 20) and Oak Associates ((WOGSX)White Oak Growth Stock), three firms known for their acumen at picking tech stocks.

In addition to the funds on our list, there are some funds that earn lower risk scores from Morningstar that still manage to beat their peers. If you work with a broker, for instance, you might look at (MFSGX)MFS Strategic Growth or (MIGFX)MFS Massachusetts Growth Stock.

Do-it-yourselfers might consider some lower-risk no-load funds that still beat their peers like (TGCNX)TCW Galileo Select Equity or (NOEQX)Northern Select Equity. If you're an index investor, you might consider (VIGRX)Vanguard Growth Index.

If you needed any confirmation of these funds' big appetite for tech stocks, just look at the cumulative top-10 holdings of the leading 10 funds. All 10 are tech stocks with a heavy emphasis on networkers like top-two holdings JDS Uniphase (JDSU)and Cisco Systems(CSCO).

Under the Hood The stocks with the biggest weighting in the combined portfolios of the 10 above funds.
Stock	Weighting in Top- 10 Funds	Number of Top-10 Funds Owning the Stock
JDS Uniphase(JDSU)	4%	9
Cisco Systems(CSCO)	3.2	8
Sun Microsystems(SUNW)	2.7	6
EMC(EMC)	2.6	7
Juniper Net(JNPR)	2.5	7
Nortel Networks(NT)	2.4	8
Oracle(ORCL)	2.3	5
Intel(INTC)	2.2	7
Corning(GLW)	1.9	6
Broadcom CI A(BRCM)	1.9	5
Source: Morningstar. Holdings as of funds' most recent portfolio reports.

This list further illustrates growth managers' movement away from tech bellwethers that rely heavily on PC sales like Microsoft(MSFT) and Dell(DELL). Neither cracks the top 10, with these managers favoring stocks of companies that rely more heavily on the growth of the Internet and the buildout of the world's communications networks, like Juniper Networks (JNPR)and Nortel Networks(NT).

If these companies are New Tech and the PC-reliant types are Old Tech, score this round to the New Tech types.

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