The managers of the
Touchstone Large Cap Growth fund could not have asked for a better 10th anniversary present.
The fund is up 22.6% year to date, more than 18 percentage points better than the
and 12 percentage points ahead of the Russell 1000 Growth Index. Over the past five years, the fund has returned an annual average of 16.4% and almost 11% per year since inception back in December 1997.
Growth Fund Smokes With Potash, RIMM
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Shawn Price and famed growth investor Louis Navellier worked their way up to managing a mega-cap fund after refining their stock-picking formula on small- and mid-caps.
"I started working with Louie 17 years ago as an analyst. Back then, all we had was a small-cap product, and once that was successful, we moved onto mid-caps," says Price. "Eventually we moved up the ladder to mega-caps, but the methodology and diligence never changed."
The fund managers start their selection process by quantitatively screening the Russell 1000 Growth Index, focusing on factors such as earnings growth and high return on equity. Once they whittle down the pool to 100 potential stocks, they switch to more fundamental, bottom-up research methods to find the 40 or so names they eventually want to own.
But hold on -- there is one final step. Price and Navellier run their final selections through an optimization program which maximizes return and minimizes portfolio standard deviation -- or in other words, make sure the stocks work well with each other, not just on their own.
"Throughout the process we continually ask ourselves, 'Why is this stock outperforming?'," says Price. "In the end, we want to own stocks that will go up due to strong fundamentals, not because of speculation or buyout rumors."
The fund's biggest position, and one of its biggest successes in 2007, is
Research In Motion
. The BlackBerry maker is up 147% year to date, and Price expects the good times to continue, despite the challenge from
"RIMM's numbers are still holding up," says Price. "They have an operating margin of more than 20%, ROE of 28% and earnings growth of over 65%. Nokia is performing well too. But not well enough to knock RIMM out of the portfolio."
Other tech winners in the fund include well-known names like
Price's biggest winner, however, is well-off-the-beaten-path fertilizer provider
Potash of Saskatchewan
"Potash is benefiting from the ethanol boom," says Price. "A record number of crops were planted this year, and those crops need fertilizer. Plus, Potash has a low correlation to tech names, so it makes for a more balanced portfolio."
One stock that is gaining in Price's view is
"It seems speculative because of the huge run-up in the price of the stock, but it has over 150% earnings growth, expanding margins and massive sales growth," says Price. "It also has the attention of Wall Street, which never hurts."
No, it does not.
Before joining TheStreet.com, Gregg Greenberg was a writer and segment producer for CNBC's Closing Bell. He previously worked at FleetBoston and Lehman Brothers in their Private Client Services divisions, covering high net-worth individuals and midsize hedge funds. Greenberg attended New York University's School of Business and Economic Reporting. He also has an M.B.A. from Cornell University's Johnson School of Business, and a B.A. in history from Amherst College.