By NELLIE S. HUANG Kiplinger News Service on Sep 9, 2013, at 3:07 AM
Small companies have been leading the performance derby lately, and that’s one reason it may be time to turn your attention to the big guys. And in a world with so many real and potential risks, why not favor the stability of large firms when you can buy their stocks at discounted prices? With that in mind, we present our top three actively managed big-company U.S. stock funds.
-- Dodge & Cox Stock (symbol DODGX). This venerable fund can be streaky. During the 2008 disaster, it trailed 91 percent of its rivals in the large-company value category. But it rebounded vigorouly in 2009, with a 31.3-percent return. That beat 86 percent of its peers, and it has done well since.
The nine managers who run this $46 billion fund, a member of the Kiplinger 25, have been on the job an average of 15 years. The one with the longest tenure, John Gunn, arrived in 1977. Since then, Stock has returned an annualized 12.9 percent, an average of two percentage points per year better than the S&P 500. Dodge & Cox Stock charges annual fees of 0.52 percent, an unusually low expense ratio for an actively managed fund.
-- Mairs & Power Growth (MPGFX). Fund managers Bill Frels and Mark Henneman love Minnesota. They have invested nearly two-thirds of the fund’s $3.3 billion in assets in firms that are based in their home state, and the bet has paid off handsomely. Including the first seven months of 2013, their fund, another member of the Kiplinger 25, has outpaced the average large-company growth fund in five of the past six calendar years.
The average market value of the fund’s holdings is $17 billion, but the managers can invest in companies of any size. Among the 46 firms in the portfolio, some are large (for example, Johnson & Johnson, with a market capitalization of $254 billion) and some are small (such as NVE Corp., a firm with a $237 million market cap that uses nanotechnology to store and transmit data).
-- Vanguard Dividend Growth (VDIGX). This fund, also a member of the Kiplinger 25, has set the gold standard for investing in dividend stocks. Manager Donald Kilbride seeks high-quality companies with good growth prospects. More important, he looks for outfits that have a proven willingness to increase dividends and that he thinks will boost payouts by at least 10 percent annually over the next five years. Since Kilbride took over Dividend Growth in early 2006, the fund has returned 8.4 percent annualized, well ahead of the S&P 500’s 6.2 percent annualized return. The fund yields 2.2 percent.
Nellie S. Huang is a senior associate editor at Kiplinger’s Personal Finance magazine. Send your questions and comments to moneypower@kiplinger.com. And for more on this and similar money topics, visit tulsaworld.com/kiplinger.
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As a group, the seven bond mutual funds in the Kiplinger 25 fared slightly better, but still suffered an average loss of 3.1 percent.
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