Top Growth And Value Funds

3/17/2014


Value funds focus on cheap stocks, while growth funds look for sales and profit gainers. We found 12 high-potential U.S. stock funds that typically adhere to one of the two styles, making them attractive picks for investors looking to build diversified portfolios or play a particular market segment.

Funds that stick to a defined style can make solid core holdings because they establish your asset allocation. To be sure, it's rare when a fund holds only growth or value stocks, and many stocks possess both characteristics. Still, style characteristics explain a large part of a fund's performance, so investors should pay attention.

To flush out attractive style plays, we put more than 4,400 mutual funds and exchange-traded funds (ETFs) through our proprietary scoring system, which ranks funds relative to category peers based on returns, risk-adjusted performance, and expenses. To make the initial cut, a fund needed to rank among the top 20% of its category and charge below-average expenses.

We evaluated a fund's style using Morningstar's style box, which utilizes 10 factors to help slot funds into growth and value categories. Value factors include such ratios as price/book, price/sales, and price/cash flow. Growth metrics consist of growth rates for earnings, sales, cash flow, and book value. We screened for funds with at least one-half of assets firmly rooted in the growth or value camp.

We also considered a fund's style over the last five years, favoring funds that stick to their knitting. Portfolio managers who shift styles can undermine the benefit of investing in different types of funds. In addition, it is difficult to compare the performance of funds or managers that actively switch styles.

FUNDS WITH STYLE
% Of Portfolio In
Fund (Price; Ticker)
12-Mo.
Return
(%)
Growth
Stocks
(%)
Value
Stocks
(%)
Exp.
Ratio
(%)
Fund
Rating
Large-cap
Vanguard Growth Index ($49; VIGRX)
25.2
66
6
0.24
81
Guggenheim S&P 500 Pure Growth
($75; RPG) ETF
37.7
65
23
0.35
100
T. Rowe Price Value ($35; TRVLX)
25.4
19
52
0.85
93
PowerShares Dynamic Large-Cap
($29; PWV) ETF
20.2
6
71
0.59
98
Midcap
Wells Fargo Advantage Discovery
($34; STDIX)
30.0
84
2
1.28
85
iShares Morningstar Mid-Cap Growth
($149; JKH)
ETF
27.0
76
3
0.30
93
Vanguard Mid-Cap Value Index ($32; VMVIX)
25.5
10
51
0.24
96
Vanguard Mid-Cap Value ($82; VOE) ETF
25.6
10
51
0.10
97
Small-cap
T. Rowe Price Diversified Small-Cap
($26; PRDSX)
32.1
68
6
0.91
97
Guggenheim S&P Smallcap 600 Pure Gro.
($80; RZG) ETF
31.0
62
10
0.35
91
Bridgeway Small-Cap Value ($22; BRSVX)
24.3
8
58
1.03
86
Guggenheim S&P SmallCap 600 Pure Value
($63; RZV) ETF
33.5
4
65
0.38
97

Most investors should hold both growth and value stocks in a portfolio. That way, you can reduce the risk of being too heavily exposed to either style should one lag for an extended period.

The table above lists 12 funds and ETFs that have done well by focusing on either growth or value stocks. We list large-cap, midcap, and small-cap funds, including two growth funds and two value funds in each category. Four Forecasts-recommended funds are listed in bold, including T. Rowe Price Diversified Small-Cap Growth ($26; PRDSX), which was recently added to our recommended portfolios. 

OUR RECOMMENDED MUTUAL FUNDS
Year-To-Date *
--- % Of Portfolio ---
 
Fund (Price; Ticker)
Return
(%)
Rank
Conser-
vative
(%)
Growth
(%)
Fund
Rating †
Artisan International ($30; ARTIX)
(1.1)
D
9
9
96
Dreyfus Midcap Index ($38; PESPX)
2.5
C
0
0
61
Dreyfus Small Cap Stock Index
($30; DISSX)
1.3
C
0
0
91
Fidelity High Income ($9; SPHIX)
2.0
D
5
4
65
Homestead Small Company
($38; HSCSX)
2.3
A
5
8
94
PIMCO Total Return ETF
($107; BOND)
1.9
B
6
0
NA
T. Rowe Price Divers. Small-Cap Growth
($26; PRDSX)
2.4
C
9
9
97
T. Rowe Price Value
($35; TRVLX)
2.3
A
8
9
93
Thompson Bond ($12; THOPX)
1.8
A
6
0
93
Vanguard 500 Index ($173; VFINX)
1.4
B
6
7
81
Vanguard Dividend Growth
($21; VDIGX)
0.6
D
12
12
85
Vanguard GNMA ($11; VFIIX)
2.0
A
0
0
96
Vanguard Growth Index
($49; VIGRX)
2.6
C
11
11
81
Vanguard Inter.-Term Tax-Exempt
($14; VWITX)
2.3
B
0
0
90
Vanguard Selected Value
($29; VASVX)
1.5
D
5
7
99
Vanguard Short-Term Invest.-Grade
($11; VFSTX)
0.7
B
0
0
97
Vanguard Total Bond Mkt. Index
($11; VBMFX)
1.5
D
0
0
53
Vanguard Wellesley Income
($25; VWINX)
1.3
C
0
0
98
Vanguard Wellington ($38; VWELX)
1.3
C
6
9
96
Wasatch International Growth
($29; WAIGX)
(0.1)
E
7
8
71
Wells Fargo Advantage Discovery
($34; STDIX)
2.1
D
5
7
85

* Year-to-date ranks through Mar. 11 from Morningstar, comparing performance among funds with same objectives. A = top 20%; B = next 20%; C= middle 20%; D = next 20%; E = bottom 20%.
† Fund ratings are percentile ranks based on our fund-rating system.


Current Hotline

Stock Spotlight

Individual Stock Reports

ISRs make stock research easy!

Perhaps the most valuable two page reports available anywhere.

All the data you would normally have to plow through years of 10-K filings, earnings reports, and reams of market data to assemble — yours all in one concise report.

ISRs contain our proprietary Quadrix scores — find out how we rate all the stocks in the S&P 500.

Visit us at individualstockreports.com