Stock funds are like people. Some can carry their weight and some just can't.
Case in point: The $41.1 billion
(AGTHX Quote - Cramer on AGTHX - Stock Picks)Growth Fund of America has consistently beaten its peers, while the $21 billion
(PNOPX Quote - Cramer on PNOPX - Stock Picks)Putnam New Opportunities fund has klutzed around like
Gerald Ford on roller skates for five years.
These two adviser-sold funds are our first entrants into the "Ima Winner" and "Ima Loser" fund clubs. After the past year's tech-led collapse, you know that in tough times some growth funds swim and others sink. Since you're looking for one of the former, check out the Growth Fund of America and
other faves we've previously highlighted.
Both of the funds invest primarily in big-cap growth stocks, but with vastly different results. The Putnam fund has posted a solid 19.2% average annualized gain over 10 years, but much of that comes from the long-ago bonny days when it focused on small- and mid-cap stocks. If you'd invested $10,000 in each fund five years ago, your investment would've boomed to $24,218 by the end of last month in the Growth Fund of America, while the Putnam fund would have left you with a measly $13,483.
Let's examine the champ before looking at the chump, which I own.
The Winner
The Growth Fund of America has offered that magic combination of above-average gains without gut-wrenching risk, making it one of the best core growth funds around.
| Winner |
| Fund: (AGTHX Quote - Cramer on AGTHX - Stock Picks)Growth Fund of America |
| Manager: Team |
Managed Since:
Nov. 1, 1983 |
| Assets: $41.1 billion |
| Expenses: 5.75% sales charge/0.70% annual expenses* |
| *Fee data for Class A shares. |
Its management team, which averages some 15 years of experience, focuses on companies that are growing earnings at a steady clip but skips those trading at sky-high valuations. Yes, a lot of folks do the same thing, but few do it as well.
Instead of becoming a closet tech fund, like many of its competitors, the fund spread its bets and generally steered clear of speculative dot-com highfliers. High-octane growth funds rode tech stocks to the top of the class in 1999, only to crater the next year. This fund beat its peers both years. It even managed to eke out a 7.5% gain in 2000, while the
S&P 500 fell more than 9%.
| A Knack for Leading the Pack |
 | (AGTHX Quote - Cramer on AGTHX - Stock Picks)Growth Fund of America | Avg. Peer |
| YTD | -9.5% | -19.5% |
| 2000 | 7.5 | -14.4 |
| 1999 | 45.7 | 41.1 |
| 1998 | 31.8 | 33.2 |
| 1997 | 26.9 | 25.1 |
| 1996 | 14.8 | 19.1 |
| Best Year | 61.7 | 48.7 |
| Worst Year | -21.5 | -37.7 |
| Source: Morningstar. Data through June 30. |
Of course, there are some concerns. Due to its tame style, it might not shoot the lights out in a frenzied rally. And thanks to sales and appreciation, it has grown into a heavyweight. But like
many offerings from quiet giant
American Funds, its level-headed, team-management approach helps avoid white-knuckle volatility and the nasty effects of asset glut.
The fund has consistently beaten its peers; its worst 12-month loss over 10 years is 21.5%, compared with a 38% fall for the category. In addition to its solid risk/reward profile, its 0.70% expense ratio is less than half the category average. American Funds also recently rolled out a fleet of new share classes, making it easier and cheaper for a broader range of advisers and investors to buy these funds.
If you've been burned by a tech-sick growth fund and are looking to trade up, give this one a long look.
The Loser
The Putnam New Opportunities fund has lost its way.
| Loser |
| Fund: (PNOPX Quote - Cramer on PNOPX - Stock Picks)Putnam New Opportunities |
| Lead Manager: Dan Miller |
| Managed Since: August 31, 1990 |
| Assets: $21 billion |
| Expenses: 5.75% sales charge/0.87% annual expenses* |
| *Fee data for Class A shares. |
Lead manager Dan Miller focused on small- and mid-cap stocks, ringing up big returns from the fund's 1990 inception through 1995. But a glut of assets forced Miller to fish more in the more liquid large-cap pool. Instead of closing the fund, Putnam morphed it into an all-cap style that hasn't worked well.
The fund has lagged its average peer in four of the past five calendar years, according to Morningstar. While it was able to ride tech picks to an above-average 70% gain in 1999, it has since given much of that money back, losing almost half its value over the past 12 months.
Why do I own it? Well, I worked at Putnam in the mid-1990s when the fund started to fall off its pace. Like a lot of folks who own this fund, I ignored it for a few years because it was still going up, if not as quickly as its peers. Its recent steep losses make it a more dire situation, one that I plan to rectify presently.
| What Have You Done for Me Lately? |
| (PNOPX Quote - Cramer on PNOPX - Stock Picks)Putnam New Opportunities | Avg. Peer |
| YTD | -24.5% | -19.5% |
| 2000 | -26.1 | -14.4 |
| 1999 | 69.7 | 41.1 |
| 1998 | 24.4 | 33.2 |
| 1997 | 22.6 | 25.1 |
| 1996 | 10.8 | 19.1 |
| Best Year | 97.2 | 48.7 |
| Worst Year | -53.4 | -37.7 |
| Source: Morningstar. Returns through July 26. |
If you're wondering if I've got a chip on my shoulder because I own the fund, I'm not its only critic.
"I really think this fund has fallen from grace," says Kelli Stebel, the analyst who covers the fund for Chicago-based fund-tracker Morningstar. "If performance doesn't turn around soon and by soon I mean in the next year, it's time to pull the plug."
I'm not waiting that long.
Ian McDonald
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