Investors often ask me how to build a portfolio that holds its own in down times but hands them soli...
Four Funds That Love Big Growth
05/08/2008 12:00 am EST
James Lowell, editor of the Forbes ETF Advisor and Jim Lowell’s Fidelity Investor, recommends two ETFs and two Fidelity funds that invest in large growth stocks.
Large-cap growth ETFs [and funds] invest in, naturally enough, growth stocks. In doing so, this type of fund [tries to] deliver capital appreciation to its shareholders, rather than income. As a result, an underlying stock’s earnings growth is typically favored over its actual or potential dividends. A shared trait: These types of stocks tend to be less interest-rate-sensitive and more economically sensitive, relying as they do on growing demand (business and consumer) for their goods and services.
We’re taking another moderate step toward a recovering as opposed to a weakening US economy—not that there won’t be many peaks and valleys to cross over the next two quarters. As we hike such a landscape, we can also benefit from going where most others are still afraid to go. I wanted to focus on a group that I think many investors have shied away from but which is, to my way of thinking, likely to outperform the markets over the next 12 months.
iShares Russell 3000 Growth (NYSEArca: IWZ) seeks investment results that correspond to the price and yield performance of the Russell 3000 Growth index which is made up of broader-market and broader-capitalization companies. The bias favors large-capitalization growth stocks; but the bandwidth tunes in mid caps, too. The top three sectors are technology (21.4%), consumer discretionary (16.7%), and health care (15.4%). Top holdings include Microsoft, Cisco, Apple, IBM, and Intel.
Rydex S&P 500 Pure Growth ETF (Amex: RPG) seeks investment results that correspond to the price and yield performance of the Standard & Poor’s 500/Citigroup Pure Growth Index, [which] consists of those stocks in the S&P 500 that exhibit only strong growth characteristics. The stocks here basically represent one third of the S&P 500’s overall grouping that exhibit the most pure growth stock traits. The top three sectors are consumer discretionary 0(19.2%), information technology (17.4%), and health care (15.8%). Top holdings include United States Steel, XTO Energy, Coach, and Nucor.
Fidelity Capital Appreciation (FDCAX)’s manager Fergus Shiel’s focus on both growth and value stocks, as well as domestic and foreign stocks (23% of his holdings) reflects a go-anywhere approach that I like; but make no mistake, he’s growth-oriented. Currently, his biggest overweight positions relative to his S&P 500 benchmark are industrials, consumer discretionary names, and materials; he’s banking on the global consumer. His biggest underweights: financials, energy, and technology. Here, the top holdings include Disney, Biogen, Monsanto, Alstom, and Elan.
Fidelity Magellan (FMAGX) [is] currently considered a large-cap growth fund, but [manager Harry] Lange can, has, and will continue to invest in either growth or value stocks in a range that reaches across the mid- and small-cap borders if it suits him. Foreign holdings make up 26.5% of the portfolio. Top holdings include Nokia, Corning, Canadian Natural Resources, Staples, and Monsanto.
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