The Value Line Mutual Fund Survey

Short-List Picks: Large-Cap Growth

T Large-Cap Growth he Large-Cap Growth objective group posted a total return of nearly -6% for the three-month period ended in March. Large-cap growth stocks pulled ahead of large-cap value stocks, as reflected when the Russell 1000 Growth Index bested the Russell 1000 Value Index by 0.4% in March. The first quarter of the 2009 year started off on a rocky note, as a result of the crisis in the financial sector (that began in 2008) taking a toll on the stock market. Overall, the unemployment rate continued to climb and stands at 8.5% as of March. Despite the sharp corrections at the beginning of the 2009 the stock market rebounded in March. Much of this was helped by the Federal Reserve’s effort to resuscitate the economy by lowering short-term interest rates, extending credit, and injecting money into financial institutions. Along with this rally, the housing market appears to be “hitting rock bottom” and consumer spending has increased slightly. However, with high unemployment and the increased number of foreclosures, it is uncertain as to whether the market rally will continue.

Janus Twenty Fund (JAVLX) makes it into the high-risk section of the model portfolio. The fund seeks to achieve the objective of capital appreciation by investing the fund’s net assets between 20-30 common stocks. When selecting stocks for the portfolio, management uses a bottom-up approach. It will evaluate a potential candidate to see if it is an outstanding investment opportunity and is consistent with the fund’s investment policies. If management is unable to find companies that are attractively valued, it may invest the remainder of its assets in cash or cash equivalents. Also, to a lesser extent, the fund may invest in derivatives for hedging purposes and to earn income and enhance returns. Investments in foreign equity and debt securities may also be made.

For the three-month period ended in March, the fund posted a positive return of 0.2%, besting the performance of the Large-Cap Growth peer objective group, which posted a total return of –5.70%. Also, its annualized total return has outperformed the peer objective group over the trailing three-, five-,10- and 20-year periods. Furthermore, the fund received Value Line’s Overall Rank of 2. However, it received a risk rank of 4 since the fund is considered nondiversified, and therefore management may increase or decrease its position on a single issue. The fund is designed for long-term investors with an appetite for risk. Interested investors may get the more information about this fund by calling (800) 525-3713 or visiting the Web site, www.janus.com.

In the moderate risk part of the model portfolio is Fidelity Growth Company Fund (FDGRX). The fund seeks to achieve capital appreciation. In pursuance of this goal, management invests primarily in the common stocks of both domestic and foreign companies. Management uses a bottom-up approach to select issues for the portfolio. It tends to assess a company based on its financial condition, earnings outlook, strategy, management, and industry position. Management also tends to favor companies with above-average growth potential and higher-than-average price/earnings or price/book ratios. To hedge the fund’s exposure to fluctuations in security prices and other factors that may affect a security’s value, management may buy or sell future contracts.

For the January to March period, the fund posted a total return of –2.60%, outperforming the Large-Cap Growth peer objective group by almost 3%. The fund’s annualized total return has outperformed the peer objective group over the trailing three-, five-, 10-, and 20-year periods. Its standard deviation, a measure of volatility, is slightly above the peer objective group’s average. The fund is presently closed to new investors, but current investors of the fund may still make subsequent purchases. Investors may call (800) 544-6666 or visit www.fidelity.com to get the latest information about the fund.

Vanguard Growth Index Fund (VIGRX) is part of the low-risk section of the model portfolio. The fund seeks to track the performance of the benchmark index, MSCI US Prime Market Growth Index, which is composed of principally (if not all) domestic growth stocks of large-cap companies. To achieve this goal, management uses a passive management approach. Hence, the fund’s net assets are invested in the common stocks of the benchmark index, a method known as indexing. Each stock will have the same weight proportion as the benchmark index. Also, the fund’s portfolio will be similar to the benchmark index in terms of such key characteristics as market capitalization and industry weighting, dividend yields, and price-to-earnings ratios.

The fund posted a total return of nearly – 4% for the year-to-date period through March. Its annualized total return has outperformed the Large-Cap Growth peer objective group over the trailing threeand five-year periods. Also, the fund received Value Line’s Overall Rank of 2. Its level of volatility is roughly in line with the peer objective group’s average. To learn more about this fund, call (877) 662-7447 to speak to a representative or visit the Web site www.vanguard.com.

Investors who would like to invest in an exchange-traded fund (ETF) may want to consider streetTracks DJ Wilshire Large Cap Growth (ELG). It is appropriate for this asset class and offers broad exposure to large-cap growth stocks. To learn more about this offering, visit the Web site www.amex.com.