The Daily Screen: The Best Large-Cap Blend Funds

It's understandable if you're a little reluctant to buy shares of a stock mutual fund given the market's steady decline. But if you are going to put money in the market, there are worse choices than a large-cap blend fund.

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That's because these funds, as their name implies, typically invest in stocks of big, established companies -- blending the growth and value investment styles. In other words, big-cap growth funds pay high prices for stocks of big companies growing earnings faster than their peers, and big-cap value funds shop for bargains among low-tech parts of the large-cap market. Big-cap blend funds do both.

Because they spread their money among pricey and cheap stocks, they're often seen as a solid pool to fish for a core stock holding because they rise almost as high but don't fall as far as riskier, pure-growth funds. This year they're living up to their billing, losing almost 8%, but less than the S&P 500 .

Mild Blend Large-cap blend funds have seen less suffering this year, after showing less growth than the broader market in years past
	Avg. Large Cap Blend	S&P 500
YTD Return	-7.8%	-9.5%
1-Year Return	-2.4	-4.8
5-Year Return	15.9	18.6
10-Year Return	15.8	17.7
Source: Morningstar. Annualized performance figures through Dec. 4.

While their long-term returns lag the S&P 500, these funds still boast solid gains. Consider that a $10,000 investment would've grown to more than $44,300 over the past 10 years through Oct. 31, according to Morningstar. For comparison, the same investment in the (VFINX)Vanguard 500 Index fund, which tracks the S&P 500 Index, would've topped $51,000.

If you're interested in buying shares of a large-cap blend fund after Jan.1 -- when giant capital-gains distributions no longer loom -- we've done some sifting for you. We screened the category for those funds that beat their average peer over the past one- and three-year time periods, according to Morningstar. We also sifted the leading funds' portfolios to see which stocks put them on top, but first let's look at the funds. Here's a top-10 list, ranked by one-year returns.

Leading Large-Cap Blend Funds These funds have bested their peers during the past three years
Fund	1-Year Return	3-Year Annualized
(UNACX)Waddell & Reed Adv Accumulative A	29.8%	22.7%
(BUFEX)Buffalo Equity	22.2	13.9
(AFBEX)AFBA Five Star Equity	21.4	11.3
(THPGX)Thompson Plumb Growth	19.8	13.8
(WMKGX)WesMark Growth	19.1	23
(LSCGX)Loomis Sayles Provident	18.5	20.2
(PCFAX)PIMCO Capital Appreciation A	18.2	15.7
(EXTAX)Exeter Tax Managed A	17.3	14
(ECPGX)Evergreen Capital Growth A	16.7	15.4
(CSIEX)Calvert Social Investment Equity	16.7	13.8
Avg. Large-Cap Blend fund	-2.4	10.4
S&P 500	-4.8	12
Source: Morningstar. Annualized performance figures through Dec. 4.

Given the tech-laden Nasdaq Composite's stunning 48% dive since its March 10 peak, according to Thomson Financial/Baseline, it shouldn't be a surprise that many of these leading funds are slim in tech. In light of their bent toward cheaper stocks, it's also not surprising that many of these funds aren't household names -- investors have wanted only growth funds in recent years.

Many of these funds are sold through brokers, and they're not all necessarily low-octane. For instance, Antonio Intagliata has run the broker-sold (UNACX)Waddell & Reed Accumulative fund since 1979 -- a stunning tenure these days. But his style of sharp sector switches has led to significant volatility and low tax-efficiency over the years.

If you're looking for a less aggressive fund on our list and you invest on your own, check out no-load (THPGX)Thompson Plumb Growth. The fund carries a big financial-stock weighting and has beaten more than 80% of its peers over the past one-, three- and five-year time periods, according to Morningstar. Manager John Thompson has held the reins since the fund's 1992 inception.

If you work with a broker you might check out (PCFAX)PIMCO Capital Appreciation, where David Breed and Kathleen Burdon of Cadence Capital Management have run the fund since its 1997 inception. The pair don't take big bets, merely focusing on companies with above-average growth rates, whose stocks aren't trading at thin-air valuations. The low-frills approach has kept the fund ahead of 90% of its peers over the past one- and three-year time periods.

If you're looking for a socially conscious fund -- one that tries to avoid investing in companies that make weapons or abuse the environment, for instance -- you might check out the broker-sold (CSIEX)Calvert Social Investment Equity fund. A cheaper alternative is the no-load (VCSIX)Vanguard Calvert Social Index.

Beyond our list, you might also check out the no-load (TRBCX)T. Rowe Price Blue Chip Growth fund. Manager Larry Puglia has run the fund since its 1993 inception, and his focus on companies with solid earnings growth and management teams has served the fund well. The fund beats more than 70% of its peers over the past one-, three- and five-year time periods, without going through more volatility than its average competitor.

Of course, any conversation about core stock funds has to include the Vanguard 500 Index fund. Given its diversification among the big-cap crowd and its ultralow 0.18% annual expense ratio, compared with 1.24% for its average peer, the fund is a solid choice for most investors.

If you need more evidence that growth stocks aren't boosting funds these days, look at this list of our leading funds' cumulative top-10 holdings. A year ago the list would've been littered with tech stocks, but now the list leads off with more defensive stocks like conglomerate Tyco International (TYC) and pharmaceutical shops Merck (MRK) and Schering-Plough(SGP). The only two tech names are sagging bellwethers Microsoft(MSFT) and Cisco Systems(CSCO), which are down 51.7% and 14.5%, respectively, since Jan. 1.

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
Tyco International(TYC)	1.8%	6
Merck(MRK)	1.7	6
Schering-Plough(SGP)	1.6	8
PepsiCo(PEP)	1.4	7
Cisco Systems(CSCO)	1.4	4
American Express(AXP)	1.3	4
Microsoft(MSFT)	1.1	4
Wells Fargo(WFC)	1.1	4
Enron(ENE)	1.1	4
PNC Financial Services Group(PNC)	1	3
Source: Morningstar. Holdings as of funds' most recent portfolio reports.

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