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Portfolio > Economy & Markets > Stocks

Fund Expands Embrace Beyond Big Fry

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Phoenix-Engemann:Focus Growth Fund/A (PASGX) has changed its stripes.

About a year ago it started expanding from its large-cap base. Now, it includes a healthy dose of mid- and small-cap stocks.

“For more than a year now, we’ve been positioning our holdings to take the greatest advantage of our bounding economy,” said Scott Swanson, who co-manages Focus Growth. “What we’re doing is giving this fund more flexibility and breadth.”

To be sure, the fund’s fortunes remain closely tied to big companies. At the end of 2003, 57% of its holdings were large caps, 19% mid caps and 24% small caps.

But doesn’t adding smaller caps expose the fund to a more illiquid market with less-known names? Swanson and co-manager Lou Holtz think such risk actually plays to their fund’s strengths.

They can now tap into analysts working with Phoenix-Engemann’s other funds.

“As the company’s evolved, it’s grown to include several other large- and small-cap funds,” said Swanson. “The advantage of Focus Growth is that it now combines the best ideas from all of our other funds.”

Holtz, for example, also has helped run Phoenix-Engemann:Small & Mid Cap Growth/A (PAMAX) since 2001.

The managers aim to hold their smaller picks as they grow large. “What we’re trying to do is capture the next Wal-Mart and Microsoft,” Swanson said.

To do that, Focus Growth fits a preference for bottom-up stock picking with some top-down forecasting as well.

“Our analysts do industry-by-industry reviews to see where companies are positioned and to get an idea of trends in the market,” said Swanson. “This gives us a better idea of whether we’re investing in true growth opportunities with strong long-term characteristics.”

Focus Growth’s two main metrics for choosing stocks are three- to five-year earnings forecasts and return on equity.

“What we don’t want are one-hit wonders,” said Holtz. “We’re looking for companies that can deliver for many years.”

Among favorites is Genentech Inc (DNA). Holtz refers to it as one of his fund’s racehorses.

“We use it as a fast-growth resource to help improve the returns for the overall portfolio,” he said. “It’s built on research and development. So it plays in more of the developmental phases, or early product growth phase, of the market.”


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