Big Growth, Less Risk

The Big Screen digs up less-risky large-cap growth funds.
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Aggressive tech-heavy growth funds got most of the ink and the money in 1999, but after last year's drubbing, it's a good time to look for some of the category's lower-octane fare.

The average big-cap growth fund has more than 40% of its money invested in tech stocks, according to

Morningstar

. That was great in 1999, when these funds rode the hot sector to a nearly 40% average gain. But last year the category lost more than 16% on average, as a slowing economy and thin-air valuations consequently cooled jittery investors to the sector. So, today the Big Screen is shopping for large-cap growth funds with above-average returns and below-average volatility.

We've screened the category, looking for funds that beat their average peer over the past one- and three-year periods, while also dropping less than their average peer in down months over the past three years, according to Morningstar. Here's a list of the 10 top funds we turned up, ranked by their one-year returns. We've also included their returns in the last three months of 2000, when the average big-cap growth fund lost more than 18%. We're also going to look at these funds' top stock picks, but first let's check out the funds:

You might be reluctant to look at funds in a popular-but-battered category. Still there's good reason to keep them in the fold. Compared with the

S&P 500

, which had a 21% tech weighting at the end of last year, this category hasn't been hit too hard. In fact, over the past 10 years, the average big-cap tech fund's 17.3% annualized return is right in line with the index.

Most of the funds on our list made the cut by being more price-conscious than their peers and less likely to make outsize bets on a single sector or stock. One fund that jumps off the list is the broker-sold

(SHRAX) - Get Report

Smith Barney Aggressive Growth fund, where manager Richard Freeman has been the boss since its 1983 inception.

Freeman looks for promising small- and mid-cap companies that are increasing their earnings at a 20% clip. He tends to hold on to the stocks he buys, riding winners as they graduate into large-cap territory but not making titanic sector bets. The fund beats at least 95% of its peers and the S&P 500 over the past one-, three-, five- and 10-year periods, according to Morningstar. The fund's 23.4% 10-year annualized return beats the S&P 500 by six percentage points, as well as 96% of the fund's peers.

Another solid choice is the massive broker-sold $36.1 billion

(AGTHX) - Get Report

Growth Fund of America, run by a team at quiet giant

American Funds

. The team typically favors growth companies trading at a reasonable price, a strategy often boiled down to the acronym GARP.

Though many funds herald a GARP strategy, few apply it with the consistent success of these folks. The fund has a healthy tech-stock stake, but it also spreads its money broadly among different industries. That approach has worked well: The fund beats the S&P 500 and at least 85% of its peers over the past one-, three-, five- and 10-year periods, according to Morningstar. Its 20.6% 10-year annualized return beats 87% of its peers and the S&P 500 by two percentage points.

If you're looking for a

no-load option because our list is loaded with broker-sold funds, check out

(BRGRX)

Bramwell Growth or

(JAEIX)

Janus Equity-Income. Both funds would've made our cut if their one-year returns were a bit higher.

And if you're a die-hard index investor, check out the

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Vanguard Growth Index fund, which tracks the

S&P/Barra Growth Index

. The fund hasn't throttled its peers, but it has basically kept pace with the S&P 500. The fund's 19.3% five-year annualized return beats the index by less than one percentage point. An added plus is its tiny 0.22% annual expense ratio, compared to 1.46% for its average peer.

One caveat is that tech stocks such as

Cisco Systems

(CSCO) - Get Report

have appreciated into big positions in the index that the fund tracks. At the end of September the fund had a 48% tech-stock position, according to Morningstar. That explains the fund's steep 16.9% tumble in the fourth quarter.

If you're wondering what stocks the 10 funds on our list liked best, look no further. A combined portfolio of those funds would have a cumulative holdings list comprising classic, widely held big-cap growth stocks. It would include chip titan

Intel

(INTC) - Get Report

, pharmaceutical giant

Pfizer

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and software behemoth

Microsoft

(MSFT) - Get Report

.