Today's Fund Junkie features three sections on the best funds for growth investing: Big-cap growth funds, mid-cap growth funds and small-cap growth funds.
Mid-cap growth funds rode tech stocks to a nearly 66% average gain in 1999. But over the past year, these funds -- which focus mainly on stocks with market caps between $2 billion and $9 billion -- are down almost 40%. Here's a handful that have tended to gain more and lose less than their peers.
There's something on the list for just about anybody, with some funds keeping a close eye on risk and others swinging for the fences. A unifying theme is that all of these funds have consistently topped their peers and not fallen as hard as they did in down months over the past three years, according to
The first two funds, the no-load
Fidelity Mid-Cap Stock fund and the no-load
T. Rowe Price Mid-Cap Growth fund, both stick to mid-cap stocks and spread their bets but still dust their peers.
In running the Fidelity fund, manager David Felman follows a price-conscious approach by spreading the fund's $7 billion among more than 350 stocks, which is more than three times the size of his average peer's portfolio, according to Morningstar. Felman pays attention to valuations and isn't afraid to ramp down his exposure to an overvalued sector. At the end of January 2000, for instance, the fund had more than 41% of its money in tech stocks, but it was down to just 5.7% 12 months later.
That lower-octane approach is tough to knock in light of the fund's performance: It has beaten at least 90% of its peers this year, as well as over the past one-, three- and five-year periods, according to Morningstar. Of course, there are some concerns. Felman only took the reins in August 1999, and the fund was one of last year's top sellers, taking in more than $3.7 billion -- which could slow it down. That said, Felman has navigated a tough market well, and his tech exodus implies that the fund's popularity isn't hamstringing its flexibility so far.
Brian Berghuis has run the no-load T. Rowe Price Mid-Cap Growth fund since its June 1992 inception, and it hasn't had a down year yet. He spreads the fund's $6.6 billion among some 130 stocks without reaching beyond the mid-cap pool or making outsize bets on specific stocks or sectors. He only stashes some 15% of the fund's money in his top-10 picks, less than half what his average peer does.
That steady approach might not shoot the lights out, but the fund's 14.2% five-year annualized gain has beaten nearly 70% of its competitors, and its 11.8% loss over the past year has topped more than 85% of them.
The next two funds on the list, the no-load
Bridgeway Aggressive Growth fund and the broker-sold
Calamos Growth fund, are more racy fare best-suited for aggressive, long-term investors.
In running the Bridgeway fund, manager John Montgomery uses four different quantitative models to rotate among different stocks and sectors poised to head north. That might sound sleepy and academic, but the fund makes big bets. For instance, Montgomery isn't afraid to sink about half the fund's assets in his top 10 picks, or let his top holding appreciate until it alone represents 10% of the fund's assets -- compares with about 5% for most funds.
While this is an aggressive fund, it has been consistent. Montgomery has topped his average peer for five straight years and beaten 99% of the fund's peers over the past three- and five-year periods.
The Calamoses, John Sr. and John Jr., have a similarly aggressive style and impressive record in running the Calamos Growth fund. They use a blend of quantitative and fundamental research to single out small- and mid-cap stocks that could be poised to top Wall Street's expectations, trading frequently among their picks.
In those brief terms, the strategy sounds fairly simple, but the fund's results are far from pedestrian. The fund has beaten nearly all of its peers over the past three-, five- and 10-year periods, and topped all its competitors over the past five years. Its 18.7% tumble over the last 12 months is less than half the losses of its average peer. (For more detail on the fund's style, check out this
10 Questions interview with John Calamos Sr.)
RS MidCap Opportunities charts a course somewhere between staid and aggressive. Manager John Wallace, who has held the reins since the fund's 1995 inception, typically focuses on fast-growing companies whose shares he thinks could double in price within three years. Yes, that's aggressive, but he also sets firm price targets for the companies he buys and usually sells a stock once it falls 15% below the fund's purchase price.
The fund has been hit hard by the tech meltdown, falling nearly 29% over the past year. But that's still less than the average mid-cap growth fund has lost, and the fund still has beaten more than 80% of its peers over the past five years.
Beyond these five funds, there are at least three others that merit a mention. The no-load
Vanguard Capital Opportunity fund is arguably the class act of the category. Co-managers Theo Kolokotrones and Howard Schow of
try to smoke out companies whose shares don't reflect their growing earnings. That price-conscious approach has worked well. The fund's 34.7% three-year annualized return has beaten all its peers.
Why isn't it on the list? It's closed to new investors.
Two other funds that aggressive investors might want to check out are the no-load
Invesco Dynamics fund and the no-load
Pin Oak Aggressive Stock fund. Each typically has a big tech appetite and isn't afraid to pay up for shares of fast-growing shops. They both still boast solid long-term gains, but have been whacked harder than most over the past year.
Fund Junkie runs every Monday, Wednesday and Friday, as well as occasional dispatches. Ian McDonald writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to
firstname.lastname@example.org, but he cannot give specific financial advice.