March 13, 2003 — Unsettling headlines may be roiling the markets in recent months, but several long-standing investment features — notably stable fund management — can boost long-term fund results, as seen in the ten-year returns through February for large-cap funds.
The table below lists the ten best-performing large-cap funds, based on ten-year annualized returns through last month. Despite market gyrations over this period, these funds generated solid returns ranging from 15.2% to 12.1%.
“These funds are all run by experienced management teams that have been in place for over ten years,” said Rosanne Pane, mutual fund strategist for Standard & Poor’s. They also focus on “attractive valuations and cash flows,” she added.
Long-term experience, particularly in down markets, can be invaluable, said John W. Thompson, co-manager of Thompson Plumb Growth Fund (THPGX). “If you had your brains seared in some bad markets, you never forget it,” said Thompson, who has been on the Growth Fund’s team since 1992. Since he founded Thompson, Plumb & Associates in 1984, Thompson said managing money in the 1987 bear market has helped him in the current downturn.
Several of the ten funds have apparently built returns by holding stocks for long periods. Turnover, for most of the funds, is less than 25%. “If you have a fine company, why would you eliminate it?” said George Mairs III, manager of Mairs & Power Growth Fund (MPGFX). Last year, Mairs & Power Growth had a turnover rate of 2%. Quoc Tran, an analyst with Weitz Series Fund: Value Portfolio (WVALX) noted that “the best ideas tend to have a long shelf life.” Last year, Weitz Series Value Portfolio had a turnover rate of about 13%.
Looking at valuations apparently helped many of the ten best-performing large-cap funds, since six are value offerings, and three are blend funds. Following a value-oriented strategy may have helped over the long term, since large-cap value was the best-performing large-cap fund style category for the ten years through last month.