July 16, 2003 — The market is only beginning to rally, says Doug Foreman, manager of TCW Galileo Aggressive Growth Equity Fund/I (TGMCX).
Looking ahead, Foreman thinks the tech and biotech sectors offer the most promise. “It’s just getting started,” the manager says of the potential gains from these industries. He bases his optimism on these sectors’ revenues and cash flows — “higher than in 1999″ — and valuations — “fractions of what they were in 1999.”
Being aggressive has recently fueled gains for the TCW Galileo portfolio. Faced with steep losses in the recent bear market, Foreman says many growth investors became more defensive. “I’m glad they got conservative,” he says of many peers. Foreman’s fund was the second best-performing mid-cap growth fund for the one-year period through June. Finishing behind Legg Mason Inv Tr: Opportunity Tr/Prim (LMOPX) with its 40% gain, TCW Galileo Aggressive Growth rose 23.4% for the one-year period through last month, while the average mid-cap growth fund was unchanged.
Though the fund outperforms in growth-led markets, it’s a lot more volatile than its peers, and has got hit hard on the downside. During the tech selloff in 2000, the portfolio lost 33% compared to a loss of 9.1% for its peers. The fund’s high standard deviation versus that of the average mid-cap growth fund highlights the variance of its returns, Standard & Poor’s data shows. Indeed, the fund had a rough time during the recent bear market. For the three-year period ended last month, TCW Galileo Aggressive Growth lost an average annualized 29.8%, versus 16.1% for its peers.