The Big Screen: Consistent Outperformers in Big-Cap Growth and Big-Cap Value Funds

If one road home is pocked with occasional and deep potholes and another is smooth as a wedding cake, you know which you'll choose. The same principle can apply to picking a stock fund.

Screen Gems: High Returns, Low Fees

Mid-Cap Growth Funds

Large- Cap Growth Funds

Tech Funds

It's a good idea to look for a fund that beats its peers over the last five years, but stopping there overlooks a key question: How rough was the ride? Sure, half the funds with five-year records beat their average peer and the other half doesn't; but a fund that beats the average in each of those years is a rare and good find. That's because, like stocks, most funds tend to perform in bursts. This might be natural, but if you need your money in a tough year it can be a real drag. Hence the advantages of a consistent performer.

Consider, for example, last year when large-cap funds of all flavors showed well below their average returns over the last five years.

Living Large Among large-cap fund categories the past five years, large-cap growth funds have ruled the day.
	2000 Return	5-Year Avg. Return
Large-Cap Growth Funds	-14.1	19.1
Large-Cap Blend Funds	-7.0	16.5
Large-Cap Value Funds	5.5	14.0
Source: Morningstar. Returns through Jan. 24.

So, today The Big Screen goes hunting for consistent outperformers among the ranks of big-cap growth and big-cap value funds. We sifted each pack looking for funds that beat their average peer in each of the past five consecutive years. Remarkably few funds make the cut, just 11 altogether.

Let's see what we have, starting with the growth funds.

Large Lineup
Large-Cap Growth Funds
Fund	5-Year Annualized Return	YTD Return
(MFSGX Quote)MFS Strategic Growth	31.8	8.1
(HGEAX Quote)Heritage Growth Equity	29.1	5.3
(JAGIX Quote)Janus Growth & Income	25.9	4.0
(NOEQX Quote)Northern Select Equity	23.9	-7.8
Avg. Large-Cap Growth Fund	19.1	3.8
Large-Cap Value Funds
Fund	5-Year Annualized Return	YTD Return
(SLASX Quote)Selected American	22.7	0.6
(RSIVX Quote)RSI Retirement Value Equity	21.3	0.0
(NYVTX Quote)Davis NY Venture	20.5	0.7
(CABDX Quote)Alliance Growth & Income	20.1	3.7
(WESWX Quote)Gabelli Westwood Equity	18.9	-0.3
(VIVAX Quote)Vanguard Value Index	17.4	3.1
(WFGIX Quote)DLJ Growth & Income	16.9	-3.2
Avg. Large-Cap Value Fund	14.0	0.6
Source: Morningstar

At the top of the list, you'll find the broker-sold (MFSGX Quote)MFS Strategic Growth, fund, where Irfan Ali took the reins in early 1999 after working on the fund for a year under former manager Chris Felipe. Ali looks for companies with consistent earnings growth and had a fairly diversified portfolio of more than 100 stocks at the end of last year.

That approach helped the fund gain more than 43% in 1999 and lose just 10.9% last year. The fund, launched at the start of 1996, beat about two-thirds of its peers in both years and beats more than 75% of its peers over the last one-, three- and five-year periods.

Like Ali, Ashi Parikh took the reins of his fund, the broker-sold (HGEAX Quote)Heritage Growth Equity fund, in early 1999. But unlike Ali, Parikh appears to have a racier style. At the end of November, for instance, the fund had more than 40% of its assets invested in tech stocks, according to the most recent Morningstar data. In 1999's frothy, tech-led market the fund gained more than 66%, trouncing more than 80% of its peers, and it lost 11.6% last year, compared with a 14.1% loss for its average peer.

You might be surprised to see a Janus fund on this list given the licking the Denver firm's tech-heavy funds took last year. But David Corkins, who took over the no-load (JAGIX Quote)Janus Growth & Income fund when Tom Marsico left in 1997, managed to keep the fund ahead of its peers. Like his colleagues, Corkins likes growth stocks but this fund is less aggressive than most of its Janus siblings.

For starters, Corkins keeps 5% to 10% of the fund's assets in bonds to generate income. He also tends to be a bit more price-conscious and diversified in his approach than more aggressive Janus siblings. The fund lost 11.4% last year, less than some 60% of its peers, and Corkins' 23.5% average annual return over the last three years beats more than 80% of his big-cap growth competitors.

Robert Streed has run the no-load (NOEQX Quote)Northern Select Equity fund since its 1994 inception and his diversified style has worked well. At the end of the third quarter, the fund's most recent portfolio report, Streed had only modest sector bets and his fund lost only a bit more than 4% last year, holding up better than 85% of its more tech-laden peers.

One manager that barely missed making the growth fund list because of a tough year in 1996 is worthy of an honorable mention: Richard Freeman, who has run the broker-sold (SHRAX Quote)Smith Barney Aggressive Growth fund since its inception in 1983. Freeman scours the small- and mid-cap markets for stocks of companies growing their earnings at a 20% clip and he tends to stick with those he likes, hoping to ride them up into large-cap territory.

The fund beats the S&P 500 and more than 95% of its peers over the last one-, three-, five- and 10-year periods. The fund's 23.4% 10-year annualized return over the last 10 years beats the S&P 500 by six percentage points, as well as 96% of its peers. Freeman's diversified approach helped the fund actually gain 19.2% in 2000, catapulting him to the top 1% of his peer group.

As you scan the big-cap value funds that made our cut you might be expecting to see a name that isn't there: Bill Miller, manager of the (LMVTX Quote)Legg Mason Value Trust. Miller might be the only fund manager to beat the S&P 500 over each of the last 10 years, but he actually trailed his peers last year when he lost 7.1%, compared with a 5.5% gain for his average peer.

This list highlights the sound skills of Chris Davis, co-manager of the broker-sold (SLASX Quote)Selected American and (NYVTX Quote)Davis NY Venture funds. He took over both portfolios in 1995; Ken Feinberg became co-manager of both funds in 1998. They essentially try to smoke out solid businesses they think are undervalued and hang on to them for years. In both funds this has led to a financial-stock weighting in the 40% range, but a decent allocation to battered tech stocks, too.

The strategy sounds pedestrian, but it has led to solid returns. Both funds have posted positive returns and beaten their average peer each year since Davis took over.

Another solid manager on our value-fund list is Susan Byrne, who's run the no-load (WESWX Quote)Gabelli Westwood Equity fund since its 1987 inception. Byrne looks for industries that will benefit from growth trends and tries to find bargains in those areas, carrying around 40 stocks in the portfolio. The health care and energy stocks she bought when they were out of favor paid off last year, helping her post a 12% gain, more than double her peers'. The fund beats the S&P 500 and at least 65% of its peers over the last one-, three-, five- and 10-year periods.

Index-fund lovers are no doubt heartened to see the no-load (VIVAX Quote)Vanguard Value Index fund on this list. Here indexing guru Gus Sauter tracks the S&P/Barra Value Index, which is essentially the stocks in the S&P 500 with the lowest stock prices relative to the company's book value. As you might imagine, pricey tech stocks aren't a big part of this fund's portfolio. Still, the eight-year-old fund has beaten its average peer in each of the last six years.

The fund's minuscule 0.22% expense ratio, a fraction of the category's 1.42% average, is another plus and probably one reason why the fund has managed to beat its competitors.

There you have it, a few funds that have given shareholders a smooth ride on the way to above-average returns.