Value always beats growth? Not so fast, Fool. Fund researcher Morningstar reports that, over the past three months, large-cap growth funds have outperformed their cheapskate rivals by roughly 2%. Meanwhile, the average small-cap growth fund was up 1% on its value-oriented peer over the same period.
The turnabout appears to have caught the attention of investors. According to Trim Tabs Investment Research, inflows into domestic stock funds should reach $12.3 billion during November, with much of those funds earmarked for growth-oriented choices.
Meanwhile, at least one analyst says JanusCapital (NYSE: JNS ) will boost earnings by -- wait for it -- 55% next year. On the whole, the Street believes that the growth-fund guru is capable of producing a 38.5% net profit gain during 2007. Either picture is positively rosy compared to the dark days of scandal that once plagued the firm.
Surely investors are to thank for the resurgence. They appear to once again trust Janus and peers such as Fidelity and T. Rowe Price (Nasdaq: TROW ) to manage their money. Researchers and history say that's an excellent choice. Nevertheless, before you go for growth funds, consider first these two pieces of Foolish advice:
- Don't pay to invest. Many funds from the flavor-of-the-month club sport sales charges you'll pay to invest. Surely there are some excellent load funds. But there are just as many, if not more, truly championship-caliber choices that will charge you little for giant-sized performance.
- Invest with a winner. Some funds change managers more often than my four-year-old daughter, who commands the kids' dress-up box, changes clothes. It's silly. Better for you to find a manager whose proven growth investing approach has delivered years of market-busting gains, such as Harry Lange, Tom Marsico, and Will Danoff.
After years on the sidelines, growth is finally back on top. And the rally could continue for years. Being a growth investor myself, I won't blame you if you choose to capitalize. But be careful if you do. Forget the flavor-of-the-month club. Place your money instead with disciplined investors who'll earn their fee via performance rather than sales gimmicks. Your portfolio will thank you for it.
Get to know some of the best stock pickers in the business:
- Bob Rodriguez at FPA Capital likes 'em cheap.
- So does Don Yacktman of the Yacktman Fund.
- But Robert and Jeff Bruce of the Bruce Fund go for growth where others won't.
Think you can't beat the market with funds? Think again! The selections in Shannon Zimmerman's Motley Fool Champion Funds portfolio, which includes Yacktman, are up an average of 25% vs. just 16% for their comparable benchmarks. Ask us for an all-access pass to get an unfettered look at all of Shannon's picks, manager interviews, and model portfolios. Go ahead; it's free for 30 days and there's no obligation to buy.
Fool contributor Tim Beyers, ranked 1,038 out of 14,298 in Motley Fool CAPS, is still a stock jock, but he's liking funds more and more each day. Blame Shannon. Tim didn't own shares in any of the companies mentioned in this article at the time of publication. Get the skinny on all of the stocks in Tim's portfolio by checking his Fool profile. The Motley Fool's disclosure policy is always championship caliber.