NEW YORK (TheStreet) -- For do-it-yourself investors seeking stock mutual funds, the largest companies have long been Vanguard, Fidelity and T. Rowe Price (TROW) - Get T. Rowe Price Group Inc. Report.
They've won loyal followings by offering broad collections of reliable funds -- not always delivering top returns, but rarely finishing at the bottom of the standings. Just as important, the companies all boast squeaky-clean images, since they have avoided the scandals and blowups that have plagued other fund families.
Which of the three has the best record? To find out, The No-Load Fund Investor newsletter calculated the average returns for each company over various periods. All three companies posted decent results. During the past five years, the average Vanguard fund outdid 60% of competitors, while Fidelity surpassed 62%. The top prize went to T. Rowe Price, which outperformed 72% of peers.
T. Rowe Price's performance was particularly impressive because the company outpaced its larger rivals in a variety of categories, including small growth, midvalue, large blend and international. The victory may be due to intense risk-control efforts. T. Rowe Price portfolio managers have long avoided swinging for the fences and helped the company excel during the downturn.
In 2008, some Fidelity funds lagged because they overweighted financial stocks.
American International Group
and other troubled financial companies, helping the fund lose 49% of its value for the year and lag 95% of large-growth competitors, according to Morningstar. In contrast,
T. Rowe Price New America Growth
fell 38% and outpaced 67% of competitors. The T. Rowe Price fund limited losses by focusing on growing companies with modest share prices.
A winning holding was
, a travel-booking company that gained market share.
Vanguard was pulled down by the poor showing of its quantitative funds.
Vanguard Strategic Equity
dropped 42% in 2008 and trailed 67% of its midblend competitors. The fund had big stakes in troubled financial companies, including
, which securitizes student loans.
Investors who wish to benefit from the steady T. Rowe Price approach have many choices to consider. A top large-value selection is
T. Rowe Price Equity Income
, which has returned 4.2% annually during the past 10 years, outdoing 78% of competitors. Manager Brian Rogers outperformed during the downturn of 2008 and surpassed most competitors in last year's rally. Such consistency is not unusual; the fund has finished in the top half of its category in eight of the past 10 years.
Rogers achieved his results by focusing on high-quality companies that have fallen out of favor because of temporary problems. He bought
Bank of America
when it sank early last year, and the stock has rebounded sharply. Other blue-chip holdings include
Another consistent choice is
T. Rowe Price Dividend Growth
, which has returned 2.4% annually during the past 10 years, beating 85% of its large-blend competitors. Manager Tom Huber favors steady companies with high returns on equity. Most holdings can increase dividends because of growing cash flows.
A big holding is
, which seems poised to raise its dividend as the bank recovers from the financial crisis. Other favorite stocks include
Among the strongest performers is
T. Rowe Price Small-Cap Value
, which returned 10% annually, running past 94% of small-blend competitors. Manager Preston Athey buys small positions in low-priced stocks, including troubled businesses and undiscovered fledglings. After buying, he holds for years. The fund has an annual turnover of 8%.
When stocks rally, Athey allows the winning stakes to grow and account for a bigger percentage of assets. He sells stocks when they grow into midcaps. In the past year, he has scored big gains by buying retailers that sank as the recession unfolded. Winning holdings include
, a regional department store chain, and
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Stan Luxenberg is a freelance writer specializing in mutual funds and investing. He was formerly executive editor of Individual Investor magazine.