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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Unloved Growth Funds That Could Be Poised to Soar

NEW YORK (TheStreet) -- Investors have been fleeing aggressive-growth funds. The funds were crushed during the financial crisis, and lately they have lagged the markets.

But this could be a time to reconsider aggressive-growth managers, who buy stocks with rapidly growing earnings. In the past, the funds delivered outsized returns to patient investors who waited through the hard times. Top funds that returned more than 10% annually during the past decade include Driehaus Mid Cap Growth (DRMGX), RS Select Growth (RSDGX), Turner Emerging Growth (TMCGX), and Turner Small Cap Growth (TSCEX).

Aggressive-growth managers focus on technology stars and other companies that are increasing earnings at annual rates of 12% or more. Many of the managers are willing to pay high prices for rapid growers. The highflyers tend to soar during bull markets as confident investors bid up shares of companies with promising futures. But in downturns, the ebullient mood can change quickly and there have been periods when the expensive shares declined sharply.

This year aggressive-growth funds have been unloved. Volatile technology shares have lagged as nervous investors gravitated to steady performers, including rock-solid dividend payers.

All too often investors have bought aggressive funds at the height of rallies -- and just before the stocks collapsed. Disillusioned with the big losses, shareholders sold near troughs. To avoid such bad outcomes, investors should buy aggressive growth when it is out of favor and then hold through the inevitable ups and downs.

Although the aggressive funds can take investors on a rough ride, top managers can compensate for sharp downturns by achieving big returns in rallies. Consider American Century Heritage (TWHIX). With stocks climbing in 2007, the fund returned 45.8%, and outdid 99% of peers in the mid-growth category, according to Morningstar.

Then in the turmoil of 2008, the fund sank 46.2% and lagged 63% of peers. Despite the big loss, American Century returned 11.0% annually during the past 10 years, topping the S&P 500 by 4 percentage points and surpassing 87% of peers.

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!
DOW 17,113.54 +61.81 0.36%
S&P 500 1,983.53 +9.90 0.50%
NASDAQ 4,456.0160 +31.3120 0.71%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

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