Four Growth Funds with Real Pizzazz
01/02/2008 12:00 am EST
Thurman Smith, editor of Equity Fund Outlook, finds some growth funds that may continue to outpace the market in 2008.
American Century has finally formally acknowledged the co-management of Glen Fogle and David Hollond at American Century Heritage (TWHIX). They have been on the formerly three-man team since February. As is American Century’s practice, the two look for acceleration in revenue, earnings, relative strength, and price momentum.
A global theme is evident: growing economies in Brazil, Russia, and India with fast-growing middle classes that demand better consumer products and services. This in turn accelerates infrastructure creation. So, the fund has positions in firms such as tractor makers, power plant builders, and marine construction.
Also of interest are US companies with earnings growth driven by their international component. Examples are aerospace and industrial-turbine makers with a strong foreign customer order list. Unfortunately, there is now a load charge for new retail investors, though none for clients of advisors.
Mid-cap American Century Vista (TWCVX) is run by Heritage’s Hollond and Fogle, along with (since July) former analyst Bradley Eixmann. So it’s not surprising to see similar themes and a similar mean market cap in the $9-billion area. Rapidly growing industrials and telecommunication have been major, and rewarding, areas of concentration.
Despite its high turnover, Vista has not thrown off a lot of distributions. However, its rapid trading and earnings-chasing approach can lead to large downside risk in a major decline, such as in the 2000-2002 bear market, during which it lost half its value.
Foreign stocks, including some in emerging markets, helped Harbor Mid Cap Growth (HIMGX) achieve its 18.5% annualized return since Michael Carmen and Mario Ablarach took over at the end of May 2005. Overweighting in software and business services has helped, too. This return compares well with the 11.1% of the market. However, its reward/risk efficiency is only neutral; with a Risk Exposure of 14.7, this tax-efficient choice is strictly for aggressive investors.
Making an occasional appearance on the hit parade, Quaker Strategic Growth A (QUAGX) is again in the spotlight. Its charter calls for firms of any size, but the fund has been solidly in the large-cap zone for most of its eleven years.
Its long-term results show over twice the return of the average large-cap growth fund. Manu Daftary, assisted since 2002 by long/short, hedge-fund veteran Chris Perras, was once in line to outdo William Miller of Legg Mason for the record of beating the Standard & Poor’s 500 in successive years. But underperformance in 2006 nixed that.
QUAGX is a load fund, but is available no-load and without trading fee (NTF) at Schwab. It could be considered by tax-advantaged accounts in small portions as a spicer-upper.