by Bill Wysor | January 13, 2014 12:57 pm
Mutual fund investors, take note: All successful teams have a strong “core” that acts as a foundation for success.
As the NFL season winds into the final stages of the playoffs, all the winning stories revolve around some basic team strengths that result in a competitive advantage on the playing field. The same goes for investor portfolios — they need strong, well-tested core holdings like large-cap mutual funds that give investors a competitive advantage, too.
For many investors, starting with a quality large-cap fund with a management advantage is a smart way to assemble a winning portfolio.
Here are three no-load large-cap mutual funds that might make your team better over time:
PrimeCap Odyssey Growth (POGRX) is fine way to own growth stocks in large companies that represent long-term values. This team-managed fund utilizes a patient, low-turnover approach, with 10% annual turnover reflecting discipline that has worked well over time.
The $3.8 billion fund currently has 42% of its holdings positioned in the healthcare sector, with 27% of the portfolio in technology names. As an added bonus, the large-cap mutual fund also holds mid-cap names — to the tune of 28% of the fund. Recent top holdings include: Seattle Genetics (SGEN), Roche (RHHBY), Amgen (AMGN), Immunogen (IMGN) and Biogen (BIIB).
POGRX was up 39.3% last year, and has gained an annualized 21.41% over the past five years, placing it in the top 18% of its Morningstar peer group.
Fund expenses are just 0.65% annually, or $65 for every $10,000 invested. Minimum investment is a low $2,000.
Manager Larry Puglia has been at the helm of T. Rowe Price Blue Chip Growth (TRBCX) since the fund commenced operation back in 1993. His guidance over time has rewarded investors and attracted assets of $21.9 billion to this large-cap growth mutual fund offering.
Consumer discretionary names are the top sector weighing at 28%, followed by information technology holdings at 23% of the portfolio. The fund is most heavily weighted in Amazon (AMZN), Biogen, Danaher (DHR), Gilead Sciences (GILD) and Google (GOOG).
A low-turnover approach on this fund has worked well over time, with the fund up an annualized 23.2% over the past five years, landing this fund in the top 7% of its Morningstar category. This performance has resulted in the recent nomination of Mr. Puglia for Morningstar’s Domestic Stock Fund Manager of the Year award.
As is typical with funds from T. Rowe Price, expenses are reasonable at 0.76%.
When it comes to a blend of value and growth investing, Vanguard Dividend Growth (VDIGX) remains a compelling option as a core position. Manager Don Kilbride mixed stocks with “growth” characteristics alongside “value” names in an effective way.
The goal is a mutual fund with an emphasis on companies poised to raise dividend payments over time. The end result is a concentrated large company fund with 52 holdings that represent fundamentally sound businesses that tend to hold up relatively well when the market faces challenges. In 2008, this mutual fund lost 26% compared to a 37% decline for the S&P 500. In 2013, VDIGX gained a solid 31.5% to show it can prosper in an up market as well.
Assets have grown to $19.1 billion as this fund has captured investors’ attention over time. Over the past decade the fund has gained an annualized 8.8%, placing it in the top 6% of its Morningstar peer group.
In terms of sector weighting, healthcare accounts for 19% of the fund, with 15% of the portfolio dedicated to industrials. Recent top holdings include UPS (UPS), Microsoft (MSFT), McDonald’s (MCD), Walmart (WMT) and Merck (MRK).
In typical Vanguard fashion, this fund sports a low 0.29% expense ratio.
Bill Wysor is the editor of The Relevant Investor. As of this writing, he was long VHCOX and VDIGX.
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