strong relative performance during the 2000—2002 bear market might be a sign of a GARP fund that did not get carried away during the bull market.”
During the go-go years of 1995 to 1999, when large-cap growth funds returned 20% to 40% each year, GARP funds may have lagged due to their more conservative holdings. The tables turned in the next three years, when funds holding large-cap growth stocks lost 12%, 20%, and 27%.
T. Rowe Price Growth Stock was up only slightly in 2000, and then lost 10% and 23% in the next two years. This was among the best performances in the large-growth category, indicating the defensive nature of its GARP strategy. Going back 10 years, over bull and bear markets, this fund’s return is better than 9% a year, placing it in the top 10% of its category.
Similarly, Lou Holland Growth handily outpaced the average large-growth fund during the last bear market. Its 7.1% 10-year annualized return was far ahead of its benchmark, the Russell 1000 Growth Index (up 4.53% a year). At the Profit fund, annualized 10-year returns were a benchmark-beating 8.5%.
Nor are these the only GARP funds available to investors. Roseen names Legg Mason Partners Dividend Strategy Fund (CSGWX) while Dolan adds Primecap Odyssey Growth (POGRX), Jensen fund (JENSX), and American Funds Growth Fund of America (AGTHX) to the list.
If the major market averages continue to soar, such funds might merit increased interest from investors. “A few years ago,” says Hall, “almost all growth stocks were reasonably priced, so selection wasn’t as much of a concern. Today, with the market higher, it’s harder to find growth companies that give you the values you want.” GARP funds may deliver the best of both worlds–growth and value–as well as performance that can run with the bulls while taming the bears.
GARP FUNDS SNAPSHOT
Total Return Minimum Initial Expense
1-year 5-year Investment Ratio Load
American Funds Growth 22.8% 12.9% $250 0.63% 5.75%
Fund of America (AGTHX)
Legg Mason Partners 24.8 6.8 1,000 0.85 8.50
Dividend Strategy (CSGWX)
Lou Holland Growth (LHGFX) 19.8 6.7 250 1.35 none
Primecap Odyssey Growth (POGRX) 21.7 N/A 2,000 0.89 none
Profit (PVLAX) 20.0 9.6 2,500 2.45 none
T. Rowe Price Growth Stock (PRGFX) 27.5 11.0 2,500 0.70 none
data as of 6/18/07 source: morningstar inc.