Fund Combines Growth And Value

by Alan Lavine and Gail Liberman

Lately, the trend has been toward index funds, which track the performance of a particular index. As a result, the average actively managed stock fund closely follows the performance of the S&P 500, according to Morningstar Inc., Chicago.  

However, just when you think an unmanaged index fund is the way to go, at least one fund has been claiming some success by employing a variety of strategies. Shawn Price, co-manager of the $300 million Touchstone Large Cap Growth Fund (TEQAX), with Louis Navellier, sees opportunities in the old economy as well as the new.

While technology stalwarts like Dell, Yahoo, Apple and eBay are solid members of the fund’s top 10 holdings, Price also is bullish on a decidedly old economy sector, energy. Of the energy companies available to Shawn, ConocoPhillips and Occidental Petroleum Corp. are two favorites.

Price uses a combination of methods that leads him to invest in businesses with strong returns relative to their risk profile and financial strength. But what differentiates Price from many large cap growth managers is the size of the positions he takes in companies that meet his criteria. The fund only holds 35-40 companies in a given period and the fund’s top 10 holdings account for almost 40 percent of the fund.

 Over the past three years, the fund has grown at a 7.25 percent annual rate. It has outperformed the S&P 500 by 2.75 percentage points in total return annually.

The fund’s big drawbacks:

• It has about 25 percent of its assets in its five largest holdings. Overall, it only invests in about 40 stocks. So you can win or lose big in this fund depending upon whether the fund manager’s picks are on target. Over the past five years, the fund’s annual return is -5.53 percent.

• You must pay a 5.75 percent front-end commission to a broker to purchase this fund. If you pay a commission, you certainly want to make sure you get some help diversifying your holdings. The aim: Reduce the risk of losing money, while increasing your return.

Alan Lavine and Gail Liberman are husband-wife personal finance columnists, journalists and authors. They are the authors of "Rags To Retirement," published by Alpha Books. Their columns appear in newspapers throughout New England and the Southeast, as well as online. Their commentary on mutual funds and personal finance is carried by 200 radio stations nationwide every Sunday over Business News Network's Charles DeRose Financial Advisor Show. Al and Gail’s new book is "Rags To Retirement:  Stories from people who retired well on much less than you think," published by Alpha Books.

More articles by Al and Gail can be found here.