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Value Line’s Growth objective group is by far the largest group under review. It is broadly constructed on purpose, taking into consideration any fund that has a primary objective of capital growth. Income can be a secondary objective. Weeded out are funds that follow more-specific mandates, such as capital growth, by investing in small and mid-cap companies or sector-oriented funds. To fine-tune what is an extremely diverse set of funds, we use peer groups.

That said, why is there such a broad category? The main purpose is to put funds together that, by prospectus, are trying to do the same things. While it is important to compare certain funds against smaller, similar groups, it is a mistake to take them completely out of the broader construct within which they operate. Investors should be keenly aware that a fund that is the best out of 20 or 30 specific peers may still be a laggard when compared to a broader group of competition. Unless such a fund is owned for a very specific reason, there would likely be better investment options.

Despite the objective’s title of Growth, this category can contain both growth- and value-oriented funds. In fact, there is a wide variety of funds here, spanning from the expected index funds all the way to focused funds that own just a handful of stocks. Managers can take any number of approaches to investing, too, including growth, value, growth at a reasonable price, socially focused, market-neutral, and tax minimizing strategies, or, in some cases, a combination of these.

Over the long term, the Growth objective group has performed slightly ahead of the broader market, as measured by the S&P 500 Index. For the 10-year period ended March 31, 2012, the group had an annualized gain of 4.2%, while the S&P 500 Index reported a return of 4.1%. For five years and three years, the group had annualized gains of 1.8% and 22.4%, respectively, while the S&P 500 Index reported increases of 2.0% and 23.4%, respectively.  During the past year, the Growth objective group reported a return of 3.8%, compared to 8.5% for the S&P 500 Index. The group has a Risk Rank of 3, indicating an average level of risk.

However, for the year-to-date returns, the Growth objective group again outpaced the broader market. It reported a gain of 13.4% compared with a gain of 12.6% for the S&P 500 Index.

One fund with a relatively strong year-to-date return through the first quarter ended March 31, 2012 is Biondo Focus Fund (BFONX). This fund’s investment objective is long-term capital appreciation. 

The fund invests most of its assets in domestic common stocks, although it may also purchase foreign equities, investment-grade fixed-income securities, exchange-traded funds, and options.

The fund looks to have 25% of its assets in securities of companies in one or more of the following sectors: technology; financial services; and healthcare. Using bottom-up research, managers look for companies with exceptional growth prospects, quality management, a dominant position in a niche business segment; and exposure to industries with high barriers to entry. The fund may employ margin of up to 33% of the fund’s assets. As of February 29, 2012, the fund held about 125% of its assets in equity securities, implying the use of margin at 25% of assets. As of the same date, the fund’s top five positions accounted to 63% of assets, with about 20% of its assets in JPMorgan Chase & Co. (JPMFree JPMorgan Chase Stock Report)

Another fund with a very good three month year-to-date return is Touchstone Sands Capital Select GrowthFund (TSNAX). This fund’s investment objective is long-term capital appreciation. 

The fund invests at least 80% of its net assets in the common stocks of U.S. companies that are believed to have above-average potential for revenue or earnings growth. Management emphasizes investments in large capitalization growth companies.

The fund uses a bottom-up investment strategy and seeks companies with sustainable above-average earnings growth, a significant competitive advantage, a leadership position or proprietary niche, a clear mission in an understandable business, financial strength, and that are valued rationally in relation to comparable companies, as well as relative to their earnings growth.

As of November 30, 2011, the fund held about 99% of its assets in equity securities, with the balance in cash and cash equivalents. As of the same date, the fund’s top 10 positions accounted for 53% of assets, with about 8% of its assets in Visa Inc. (V). 

A third fund with a very good return through the first three months of 2012 is Eaton Vance Atlanta Capital Focused Growth Fund (EAALX). This fund’s investment objective is long-term growth of principal.

The fund's principal investment strategy is to have at least 80% of its assets in stocks with market capitalizations that rank in the top 1,000 U.S. companies. It may also invest in securities of foreign issuers through ADRs and similar investments.

Employing rigorous bottom-up fundamental analysis, the fund invests principally in equity securities of companies that are believed to generate better-than-expected sustainable growth of revenues and earnings. These businesses have historically been leaders in their industries, possess high profit margins, generate good returns, and maintain strong balance sheets.

The fund sells a stock when there is deterioration in fundamentals that leads management to become suspicious of a company’s prospective future growth. It also sells its positions to purchase a better idea or when valuations are extended beyond expectations. 
As of February 29, 2012, the fund held about 99% of its assets in equity securities, with the balance in cash and cash equivalents. As of the same date, the fund’s top 10 positions accounted for 52% of assets, with about 7% of its assets each in Apple Inc (AAPL), QUALCOMM (QCOM), and Monsanto (MON).

10 Top Growth 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

Biondo Focus

BFONX

39.69

8.84

39.69

25.75

 

Fairholme

FAIRX

31.15

3.69

31.15

31.28

3.56

Berkshire Focus

BFOCX

28.45

7.92

28.45

27.47

14.49

Tilson Focus

TILFX

26.28

8.14

26.28

35.97

0.91

Touchstone Sands Capital Select Growth A

TSNAX

23.87

5.52

23.87

34.29

 

Baron Fifth Avenue Growth

BFTHX

22.68

6.07

22.68

34.30

2.05

Eaton Vance Atlanta Capital Large Cap Growth A

EAALX

21.51

4.16

21.51

25.49

4.96

Fidelity Advisors Growth Opportunities A

FAGAX

21.41

4.22

21.41

30.90

3.42

Federated Kaufmann Large Cap A

KLCAX

21.06

4.77

21.06

33.30

 

Fidelity Growth Company

FDGRX

21.17

4.51

21.17

30.54

8.08

Growth Objective Group

  

  

13.43

2.59

13.43

25.02

1.79

  

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