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NEW YORK (TheStreet) -- For much of the past decade, small-cap stocks have outperformed large caps. But that could be changing. During the past three months, small growth funds lost 17%, lagging large growth by six percentage points, according to Morningstar. Can large stocks continue outpeforming? Yes. Large stocks are cheaper than small ones. And big stocks tend to excel when markets face the kind of uncertainty that now plagues investors.

With markets favoring companies that can grow in a harsh time, large growth funds have been standouts this year, outdoing large value by a percentage point. To benefit from a revival of large stocks, consider buying a top large-growth fund. Strong choices include

Buffalo Growth



TCW Select Equities


, and

T. Rowe Price New America Growth



In the first quarter, large stocks lagged as investors bet that shakier small stocks would benefit from an economy that seemed to be gaining momentum. Then in the spring, economic indicators turned sour. Worried that unemployment could surge again, investors sought safety in big blue chips. When small-cap funds turned down in May, large-cap funds lost less, and they have held their lead since then.

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Even after a period of outperformance, large caps look like relative bargains. The stocks of the

Russell 1000

large-cap index sell for a price-earnings ratio of 14.8, while the

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TheStreet Recommends

Russell 2000

small-cap benchmark has a multiple of 18.1. In the past, small stocks have often sold for a minor premium, but the current 22% premium is unusual. In 1993, the Russell 2000 sold at a 10% premium. Then large stocks began to soar. By 2000, the small-cap benchmark was at a 40% discount.

While they have relatively low multiples, large stocks have reported superior earnings gains as booming sales in emerging markets have boosted multinational giants. During the past five years, earnings of stocks in the Russell 1000 have been growing at an annual rate of 6.3%. In contrast, earnings of the Russell 2000 have climbed at a rate of 3.4%.

Let's take

a closer look at all three funds

mentioned above.

TCW Select Equities

Among the steadiest large growth funds has been TCW Select Equities. The fund ranks as one of the few to outperform most competitors during both the downturn of 2008 and in the rally of 2009 and 2010. Portfolio manager Craig Blum has shined by holding a mix of stocks that includes defensive all-weather performers as well as growth stars that soar when the market climbs. Blum prefers companies that can prosper for years because they have sustainable advantages. After he buys, he holds for several years. The fund has an annual portfolio turnover rate of 24%.

A defensive holding is

Mead Johnson Nutrition


, maker of Enfamil baby formula. The company has been expanding in China, Latin America and other emerging markets.

"Consumers in emerging markets are willing to pay a big premium for high-quality Western brands," says Blum.

A stock that can climb when the economy grows is



, the oilfield services giant. Blum says that as companies seek to obtain oil in hard-to-reach locations, the demand is growing for equipment and services. Schlumberger ranks as a superior competitor because it offers the technological advantages that major oil companies seek.

New America Growth

Another steady fund is T. Rowe Price New America Growth, which has returned 5.9% annually during the past five years, outdoing 93% of competitors. Portfolio manager Joseph Milano seeks high-quality companies that are gaining market share. His portfolio includes a mix of fast growers and steady performers with slower growth rates. During 2008, the fund outdid 67% of competitors, and it topped 92% in 2009.

A holding is

United Parcel Service


. Milano says that UPS has a strong balance sheet and can increase earnings at a double-digit rate. The company is gaining a more dominant position as corporations develop increasingly complicated global supply chains. The shares sell at bargain levels, he argues.

"The stock has been weak because people are nervous about the possibility of heading into a recession," Milano says. "But UPS would do fairly well in a recession, and it would participate nicely if the economy grows."

He also likes



, which operates PayPal, the dominant provider of online payment systems. PayPal is growing steadily. After a period of mixed results, the company's online retailing business is improving, says Milano.

Buffalo Growth

Buffalo Growth aims to buy premier U.S. companies that are expanding overseas. Such businesses have the potential to grow rapidly at a time when the U.S. economy is sluggish. On average, companies in the portfolio get about 50% of their revenues overseas, says portfolio manager Dave Carlsen.

A holding is



, the maker of Botox and other products used in cosmetic surgery. While other drug companies must struggle with cost-cutting pressures from governments and insurance companies, Allergan relies on private payments from patients who are eager to have cosmetic procedures, says Carlsen.

Another holding is

Agilent Technologies


, which makes electronic instruments that are used for measuring. The company is expanding sales of equipment that is used to test food.

"Consumers have an increasing desire for food safety," says Carlsen.

>>To see these stocks in action, visit the

3 Large-Cap Funds Offer Solid Growth

portfolio on Stockpickr.

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Stan Luxenberg is a freelance writer specializing in mutual funds and investing. He was executive editor of Individual Investor magazine.