American Funds SmallCap World Fund (SMCWX)
Although this particular fund is not found among the Fantastic 51, Morningstar still gives American Funds SmallCap World Fund (SMCWX) a four-star rating, so it’s definitely not a dog.
Investing in equities with market caps of $4 billion or less, SMCWX’s 11 managers can go anywhere to find the best small caps. At the moment, the fund’s $24 billion in fund assets is invested almost equally between U.S. equities and non-U.S. equities.
You’d think being a global small-cap fund that turnover would be high, but in 2013 it was just 37%, only slightly higher than its two large-cap stable mates from above, and much lower than the category average of 62%. This is good to see because small caps often take their time coming to life.
The managers have spread their bets over 494 stocks, including Netflix (NFLX), the fund’s largest holding with a weighting of 1.7%. While biotech again plays a big role in the fund, other industries are well represented including hotels, restaurants, specialty retail and the media. My favorite stock in its top 10 would have to be Domino’s Pizza (DPZ), not so much because I eat their pizza but because it’s been one of the best-performing stocks over the past years, achieving an annualized total return of 68% through March 11 compared to 27% for the overall restaurant category and 24% for the S&P 500.
Speaking of performance, SMCWX has delivered nicely, averaging a total return of 26% over the same period.
The SmallCap World fund does a great job rounding out my equity recommendations from American Funds. It charges 1.13% and also has the 5.75% load for A shares.