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

Four Large-cap Funds That Topped the S&P 500

NEW YORK ( TheStreet) -- Investors have been dumping actively managed stock funds and shifting to index funds. The movement has been particularly pronounced in the large blend category where passive choices account for more than 40% of assets. Many investors figure that it is hard for active managers to beat such popular passive large blend funds as Vanguard 500 Index (VFINX), which tracks the S&P 500.

But some active large blend funds have consistently topped the benchmark. Among the leading choices are Fidelity Large Cap Stock (FLCSX), JPMorgan US Equity (JUEAX), and Smead Value (SMVLX). Can the star funds continue outperforming? Probably. The veteran managers all employ disciplined strategies that have worked for years in a variety of market conditions.

A steady performer is Smead Value. During the past five years, the fund returned 13.7% annually, compared to 8.6% for the S&P 500, according to Morningstar. Portfolio manager Bill Smead only takes rock-solid companies. He favors businesses with extremely loyal customers. A long-time holding is McDonald's (MCD), which has millions of customers who return again and again to their favorite chain. Smead has often bought pharmaceutical companies such as Merck (MRK), which has built a sound balance sheet by serving patients who cannot live without their medications.

The fund buys when the companies are unloved. The aim is to hold for years as the stocks revive and reach new heights. While the average large blend fund turns over 66% of its portfolio annually, Smead has a turnover rate of 11%.

To explain his value style of investing, Bill Smead compares Walgreen (WAG), a fund holding, with Procter & Gamble (PG), a stock that he does not own. Both companies have strong records, but Walgreen sells for a forward price-earnings ratio of 13, compared to a figure of 18 for Procter & Gamble. Investors have cooled on the drugstore chain because it faced difficult negotiations with a major customer, Express Scripts (ESRX), a pharmacy benefits manager. But Smead says that the chain has continued to deliver reliable cash flow. "Walgreen has been as consistent a performer as Procter & Gamble for the last 30 years," Smead says.

1 of 3

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