Big-cap growth funds rode tech stocks to solid gains last year, but this year both are headed in the opposite direction.
These funds typically buy stocks of large companies that are growing their earnings faster than their peers and/or the market. As you might imagine, this approach often leads to big bets on pricey stocks in sectors like technology and telecommunications. At the end of October, the average big-cap growth fund had 43% of its money invested in tech stocks, according to
Those bets helped the average big-cap growth fund post a 39.8% gain last year. But now that the tech-laden
is down 44% from its March 10 peak, it's understandable that the average large-cap growth fund is underwater to the tune of 9.2% since Jan. 1.
In fact, it's a bit surprising that the losses aren't worse, given the tech sector's bloodbath this year. Since this is the biggest of the U.S. stock fund categories in terms of assets, it's hard to believe that most investors don't already have enough big-cap growth exposure. But if you're shopping for a fund, we've done some legwork for you. We screened the 376-fund category for those funds that beat their average peer over the last one- and three-year periods, according to Morningstar. Here's a top-10 list ranked by one-year returns.
We've also screened these 10 leading funds' portfolios to see what stocks they're betting on. But let's start with the funds.
By and large it's a tech-heavy list. At first glance you'll notice a trio of firms known for their tech-stock picking skills:
Fidelity Retirement Growth),
White Oak Growth Stock) and
PBHG Large Cap Growth). These funds aren't for timid investors, but they've held up well during this tough year. Since Jan. 1, all three funds are in the black.
It's not too surprising that two broker-sold
funds made the list. That's because
Touchstone Growth/Value and
Touchstone Aggressive Growth both have Frank Mastrapasqua at the helm and share several of the same holdings, like software shop
, server kingpin
and semiconductor concern
Growth Fund of America made the list, proving that big funds aren't necessarily sluggish. The $39.4 billion fund is one of the 10 largest funds in the nation, but its management team has kept it ahead of its peers with lower volatility as well.
If you're looking for a fund that's been less volatile than its peers, check out our chart-topper. Richard Freeman's low-turnover style helped broker-sold
Smith Barney Aggressive Growth hit fewer bumps than its average competitor, without hurting returns.
If you're looking for a no-load fund that has also beaten its peers with less volatility, check out
TCW Galileo Select Equity and
Northern Select Equity. If you're a die-hard index-fund investor, look at
Vanguard Growth Index.
If there was any doubt about these funds' taste for tech stocks, a look at their cumulative top-10 picks should lay that to rest. The vast majority of their faves have tech labels, leading off with chipmaker
, networking heavyweight
and data storage shop
. An equally weighted portfolio of these 10 stocks would be up more than 40% this year, though that figure is skewed by networker
232% gain since Jan. 1.
If we pull out Ciena, the other nine stocks are up more than 17% this year, on average.