Large-Caps Coming Back Into Vogue?

It hasn't happened yet, but Jensen fund managers Robert Zagunis and Robert Millen are sticking to their large-cap growth, high-ROE strategy.
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Investing styles, like clothing fashions, come in and out of vogue every season on Wall Street. Unfortunately for large-cap growth managers, it's been a long time since they have had a chance to strut in the spotlight.

After significantly outperforming almost all other asset classes throughout the 1990s, large-cap growth stocks have faced a rough stretch since the bubble burst. According to fund tracker Morningstar, the average large-cap growth fund has lost 6.75% annually over the past five years, compared with a gain of 16% per year for small-cap value. And while most stock strategists have been pounding the table for the long-awaited return of large-cap stocks, the reversal has yet to take place, frustrating many fund managers and their shareholders.

One pair of fund managers that has never succumbed to the whims of Wall Street's fashion sense is Robert Zagunis and Robert Millen of the $3 billion

(JENSX) - Get Report

Jensen fund. The Jensen fund strictly maintained its large-cap growth, high ROE stock-picking strategy even while the category has been plagued by underperformance. Year-to-date the Jensen fund is down less than 1 percentage point, trailing the

S&P 500

(SPX)

by 3 percentage points, but it has returned 3.5% annually over the past five years, even though the majority of large-cap growth funds lost money.

Most of Jensen's recent underperformance is due to the fund managers' refusal to add energy and utility stocks, which they consider too dependent on commodity prices and not on operations, to their portfolio. Instead, the fund managers' prefer to stick with big cash-flow generators like

General Electric

(GE) - Get Report

,

Procter & Gamble

(PG) - Get Report

and

Abbott Laboratories

(ABT) - Get Report

.

TheStreet.com's

Gregg Greenberg sat down with Zagunis and asked him when large-cap growth stocks will return to the spotlight.

To watch the StreetWatch video, click here.