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Funds in Value Line’s Growth/Income objective group place equal emphasis on capital growth and current income, or growth of income, mainly through investments in common stocks. Although this balanced description may seem like a fine line of distinction from a fund that seeks capital appreciation with a secondary objective of income, or a fund that seeks income with a secondary objective of capital growth, it indicates an important difference. Funds in the Growth objective group and the Income objective group both have specific first-tier goals—Growth/Income funds, meanwhile, are, in some ways, the midpoint between the other two. 

That said, the Growth & Income objective group covers a broad range of funds, and there is no particular naming convention that one can point to that differentiates these funds from those that reside in the Growth or Income objectives. Value, however, is a frequent inclusion in names of funds here. 

Options range from focus funds, which hold only a small number of stocks, to broadly diversified funds. There are funds that take a growth-oriented approach and those that concentrate on value investments. Size is another factor that often comes into play, with funds available that tend to focus on select areas of the market cap spectrum. Note, however, that small-cap and mid-cap funds tend to reside in the Small Cap objective group.

Over the long term, the Growth/Income objective group has been a stronger performer relative to the broader market, as measured by S&P 500 Index. For the 10-year period ended March 30, 2012, the group had an annualized gain of 3.8%, while the S&P 500 Index also reported a gain of 4.1%. For five years and three years, the group had annualized gains of 0.9% and 20.9%, respectively, while the Index reported advances of 2.0% and 23.4%, respectively. During the one-year period ended March 30, 2012, the Growth/Income objective group reported a return of 4.8%, compared with a return of 8.5% for the S&P 500 Index. The group has an average Risk Rank of 3, indicating that funds in this group might appeal to most investors.

For the year to date through March 30, 2012, the Growth/Income objective group had outperformed by the broader market, reporting a gain 11.3% compared to a gain of 12.6% for the S&P 500 Index over that span.

One fund with a relatively high year-to-date return through the year ended March 30, 2012 is Oceanstone Fund (OSFDX). The fund's primary investment objective is capital appreciation.

To achieve its investment objective, the fund invests only in common stocks on the New York Stock Exchange, and NASDAQ (both Global and Capital Markets). Management seeks undervalued stocks as compared to their intrinsic values.

Management generally sells a stock when it becomes overvalued due to a change in its intrinsic value and/or its price or management needs capital for a better investment opportunity or to pay for shareholder redemptions. Consequently, the fund engages in frequent and active trading that may result in short-term capital gains that will be taxable to the fund shareholders as ordinary income under Federal income tax laws. Furthermore, the trading costs associated with frequent portfolio turnover may have a negative effect on the fund’s performance.

Even though management will invest in small, medium, and large capitalization stocks, many of the undervalued stocks are small, with market capitalization between $20 million and $2 billion. Consequently, the fund generally holds a large number of small capitalization stocks in its portfolio.

When the adviser believes that market conditions warrant a temporary defensive posture or it is unable to find enough suitable investment opportunities, the fund may invest up to 100% of its assets in cash and cash equivalents. 

Another fund with a very good year-to-date return is Westcore Fund (WTEIX). The fund seeks to achieve long-term capital appreciation by investing primarily in common stocks of large companies selected for their growth potential.

The fund invests in the common stock of companies with market capitalizations of $2 billion and above. These equities usually have a competitive advantage in the global marketplace and the potential for high returns on capital and long-term growth. Management implements an investment strategy that is based on the belief that equity prices are correlated with earnings over time. It develops in-house financial models that reflect their growth expectations and uses several methods to estimate the intrinsic worth of a business, with an emphasis on sector-specific valuation metrics.

The fund seeks to manage risk through its rigorous valuation discipline and in-depth fundamental research and portfolio structure. Key attributes management looks for include superior management, dominant or increasing market share, an established brand position, financial strength and flexibility, and operations in attractive and growing industries. The fund strives to fully understand the drivers of growth and profitability for each company and the dynamics of the industry in which a company operates.

A third fund with a very good return through the first quarter of 2012 is Profit Fund (PVALX). The fund seeks to provide investors with a high long-term total return, consistent with the preservation of capital and maintenance of liquidity. 

Normally, the fund will invest at least 65% of its total assets in the common stocks of established, larger capitalization companies (that is, companies having a market capitalization exceeding $10 billion). The fund expects to invest a portion of its assets in stocks that pay dividends, although it can also buy stocks that are not paying dividends but offer prospects for growth of capital or future income.

The fund’s investment strategy is designed to participate in rising equity markets while limiting, as much as possible, the downside volatility which can accompany equity investing. The adviser (Profit Investment Management, LLC) uses a disciplined valuation process to select stocks generally having the following characteristics:

•  low price/earnings ratios relative to a company’s sector or historical performance;

•  strong balance sheet ratios

•  high return on capital

In the adviser’s opinion, these stocks generally enjoy low expectations from investors and are usually undervalued. As a result, in the adviser’s opinion, average “earnings” performance by such companies can result in superior stock performance, and disappointing “earnings” should result in minimal negative stock performance.

After purchasing a stock, the adviser continues to monitor its progress in relation to the overall market and its peers. In evaluating whether to sell a stock, the adviser considers, among other factors, whether:

•  the stock is overvalued relative to other investments;

•  the stock has met the adviser’s earnings expectations;

•  political, economic, or other events could affect the company’s performance; and

•  the adviser has identified a more attractive opportunity.

The adviser will not necessarily sell a security based on its relationship to these or other factors.


In the table below, we have listed 10 top-performing funds through March 30, 2012 that we follow in our Fund Advisor database.

 

10 Top Growth/Income Funds Performance

 

Fund Name

Ticker

% Year-to-date

Total Return

% 1 Month

Total

Return

% 3

Month

Total

Return

% 6 Month

Total

Return

% 5 Year

Total

Return

Annualized

ProFunds Consumer Serv Ultra Inv Fund

CYPIX

21.02

6.35

21.02

  

42.11

1.73

  

ING T.Rowe Price Gr Eq Init Fund

ITGIX

19.11

4.76

19.11

30.99

4.44

Oceanstone Fund

OSFDX

18.23

4.14

18.23

29.81

  

Westcore Growth Fund

WTEIX

17.74

4.12

17.74

27.34

  

TIAA-CREF Mid-Cap Gr Retail Fund

TCMGX

17.34

2.39

17.34

29.24

4.90

RidgeWorth Lg Cap Core Equity A

CFVIX

16.82

3.61

16.82

29.73

-0.82

Profit Fund

PVALX

16.10

3.81

16.10

30.50

4.07

Glenmede Strategic Equity

GTCEX

16.03

3.67

16.03

28.30

2.98

Matric Advisor Value Fund

MAVFX

15.98

3.82

15.98

27.98

-1.07

ING Marsico Growth Fund A

IMGAX

15.80

3.93

15.80

28.62

3.26

Growth/Income Objective Group

  

11.34

2.49

11.34

23.74

0.92

  

At the time of this article's writing, the author did not have positions in any of the companies mentioned.