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Portfolio > Mutual Funds > Equity Funds

Ten Largest Funds -- Aug. 2002 Review

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Sept. 11, 2002 — It’s only one month, but the heavyweight funds got a little relief in August.

Whether this relief will last is another question. Time will tell if August’s brief uptick signals a market rebound or a bear market rally. Since the average U.S. stock was up a modest 0.3% in August and the ten largest funds generally showed slight gains that month, 2002 still appears headed to be the third year of negative returns for the average fund investor.

Most of the giant funds show double-digit losses so far this year, yet they continued to outpace their respective peers in August, as they have for most of this year.

Last month’s snapshot also showed slight stirrings among the growth members of the ten largest group. Although the best performer among the heavyweights in August was a value offering — Investment Company of America Fund (AIVSX) — the four growth funds all did better than the blend-oriented Vanguard 500 Index (VFINX), the balanced-oriented Vanguard Wellington (VWELX), and the value-oriented Washington Mutual Investors Fund (AWSHX). In the broader, large-cap fund universe, growth offerings tended to trail both value and blend portfolios in August. Among this giant-fund group, however, the slightly better results posted by the growth funds may be an early sign of better prospects for growth investing — as several market observers are predicting due to the strengthening economy.

But overall, value investing continued to hold up best among domestic equity fund styles in August. Among the giant funds, the clearest sign of value’s better relative results is the ten largest group’s best performer in August — Investment Company of America Fund. The fund holds such value-style picks as Lilly (Eli) (LLY) and American Intl Group (AIG), but it also has a 16.6% fixed-income weighting and 7.9% foreign stock weighting as of July 31. These non-U.S. stock assets probably helped cushion the fund from this year’s volatile domestic equity market.

The best performing heavyweight fund so far this year, Income Fund of America (AMECX), no doubt benefited from its fixed income and cash holdings, which represented 27.6% and 14.6% of the portfolio as of July 31. Nevertheless it still had a significant exposure to equities — 57.8% as of July 31. Even here, though, Income Fund’s defensive bent can be seen in key holdings with relatively low price/earnings ratios, including R.J. Reynolds Tobacco (RJR), and May Dept Stores (MAY).

Ten Largest FundsInvestment Style2002 Returns Through August (%)August 2002 Returns (%)

Fidelity Magellan (FMAGX) Large-Cap Growth-20.4+1.0

Vanguard 500 Index/Inv (VFINX) Large-Cap Blend-19.4+0.7

Investment Company of America Fund/A (AIVSX) Large-Cap Value-12.3+1.5

Washington Mutual Investors Fund/A (AWSHX) Large-Cap Value-11.3+0.7

Growth Fund of America/A (AGTHX) Large-Cap Growth-21.7+1.0

Fidelity Contrafund (FCNTX) Large-Cap Growth-6.9+0.9

Fidelity Growth & Income (FGRIX) Large-Cap Blend-14.3+0.9

Vanguard Wellington/Inv WELX) Balanced-6.0+0.3

American Century Ultra/Inv (TWCUX) Large-Cap Growth-18.1+1.1

Income Fund of America/A (AMECX) Balanced-4.8+1.3

Fund Investment Style2002 Returns Through August (%)August 2002 Returns (%)

Large-Cap Growth Average-24.4+0.1

Large-Cap Value Average-16.4+0.6

Large-Cap Blend Average-19.8+0.5

Balanced Funds Average-10.3+0.9

Domestic Equity Funds Average*-18.7+0.3

S&P 500-19.4+0.7

*Excluding sector and balanced funds.

Source: Standard & Poor’s. Total returns are in U.S. dollars and include reinvested dividends.


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