Top 10 Best Performer Small Cap Growth Equity Mutual Funds of 2010

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Small Cap stocks have been the winner for year 2010 especially Small cap growth stocks. Small cap companies usually have a market cap of 2 billion and lower and may be listed in Russell 2000 index. So how can you invest in these stocks? Investing in individual stocks can be very challenging and volatile for any investor or trader. To avoid this mistake of picking wrong stocks, casual investor may choose three different ways to invest in Small Cap growth stocks such as mutual fund, exchange traded fund, and closed end funds. I'll focus on mutual fund investment for this article.

Small growth mutual fund investment will focus on faster-growing companies with lower capitalization range (i.e. less than 2 billion). These portfolios tend to favor companies in up-and-coming and young industries in their early growth stages. These companies will have high growth rates in term of earnings, cash flow, book value, and sales. In this article, I’ll discuss the best performer small growth mutual fund of 2010.


Mutual Fund Details

In general, Investing in mutual fund can provide adequate diversification for long term investor or trader. Investors need to choose the right asset to diversify in variety different sector. Mutual Fund can be classified into 3 different main categories such as money market mutual fund, fixed income mutual fund or bond mutual fund, and equity fund. There are many different classes can be derived from equity funds such as domestic equity fund, international equity fund, emerging market fund and sector funds (precious metals fund, REIT fund, Commodity fund and more).

In domestic equity fund, you will find many different classes as well such as large cap, mid cap, and small cap equity fund. As typical equity fund, one can classified into 3 different style of fund such as value fund, blend fund and growth fund. During the economic recovery, most of the growth companies can provide great return in your investment. Also to invest in small cap, the rule of thumb is having between 3-10% in this small cap fund. Please note, some of the well known fund may be closed for new investor. You may still invest in these closed funds if you have a retirement account or IRA or 529 educational accounts.


Criteria & Top 10 List

I use the following 3 criteria when I filtered the Top 10 best performer small growth equity mutual funds. The 3 criteria of choosing best performing mutual fund of 2010 are:

  • The fund total asset is more than 900 million
  • It has Morningstar Rating of 2 stars or more
  • It is not part of leveraged or bear fund

Top 10 List

Top 10 Best Performer Small Growth Mutual Fund of 2010:

  1. Lord Abbett Developing Growth A
  2. T. Rowe Price New Horizons
  3. Wasatch Small Cap Growth
  4. Federated Kaufmann Small Cap A
  5. Baron Small Cap Retail
  6. Vanguard Small Cap Growth Index Inv
  7. Vanguard Explorer Inv
  8. Prudential Jennison Small Company A
  9. Alger Small Cap Growth A
  10. Invesco Van Kampen Small Cap Growth A


Fund Info

(click column header to sort results)
No  
Mutual Funds Description  
Ticker  
Rank %  
Morningstar Rating  
Expense ratio  
Total Asset (Bil)  
Min. To Invest  
1
Lord Abbett Developing Growth A
LAGWX
5
4
1.14%
1.58
$1,000
2
T. Rowe Price New Horizons
PRNHX
15
4
0.85%
6.80
$2,500
3
Wasatch Small Cap Growth
WAAEX
16
4
1.29%
1.26
$2,000
4
Federated Kaufmann Small Cap A
FKASX
18
3
1.95%
1.23
$1,500
5
Baron Small Cap Retail
BSCFX
30
4
1.31%
3.41
$2,000
6
Vanguard Small Cap Growth Index Inv
VISGX
30
4
0.28%
7.20
$3,000
7
Vanguard Explorer Inv
VEXPX
31
3
0.54%
9.48
$3,000
8
Prudential Jennison Small Company A
PGOAX
34
3
0.89%
2.14
$2,500
9
Alger Small Cap Growth A
ALSAX
34
2
1.53%
1.21
$1,000
10
Invesco Van Kampen Small Cap Gr A
VASCX
37
3
1.34%
1.15
$1,000
11
Invesco Small Cap Growth A
GTSAX
40
3
1.31%
1.57
$1,000
updated on 2/12/2011
Lord Abbett Developing Growth Fund Holding
Lord Abbett Developing Growth Fund Holding | Source

1. Lord Abbett Developing Growth A

Lord Abbett is known as one of the oldest money management firms in the United States. The goal of this Lord Abbett Developing Growth fund is to achieve a long-term capital growth by investing in stocks of small U.S. companies. Most of the fund is invested in the common stocks of company with above-average, long term growth potential. And try to gain market share in their respective industries. At least 65% of the net assets are invested in equity securities of small companies with market capitalization at the time of purchase that falls within the market capitalization range of companies in the Russell 2000 Index. With a maximum of 10% of the assets probably is invested in foreign securities that are mainly traded outside the USA.

The fund is managed by F. Thomas O’Halloran since 2001. With the 1.58 billion assets as of December 2010, the fund has returned 7.58% over the past five years and 5.34% over the past ten years. The fund expense ratio is 1.14% quite below the average in the category which is 1.55%. The minimum balance to invest in this fund is $1,000 for brokerage account and $250 for IRA account. There is 0.35% maximum for the 12b1 fee with 5.75% on sales load. This fund can be purchased from 100 brokerages, such as Morgan Stanley – Brokerage Accounts, Protected Investors of America, JP Morgan, Merrill Lynch, etc.

Other class tickers of this fund are LADBX, LADCX, LADFX, LADYX, LADPX, LADQX and LADRX. Among all, the minimum balance to invest in the brokerage account is at LADYX as much as $1,000,000 with the lowest expense ratio of 0.79%.

Top 10 largest holdings of this Lord Abbett funds as of January 2011 are Financial Engines, Inc., Lululemon Athletics, Inc., NxStage Medical, Inc., CARBO Ceramics, Inc., Synchronoss Technologies, Inc., Middleby Corp., hiSoft Technology Intl Ltd., Salix Pharmaceuticals, Inc., IPG Photonics Corp. and Chart Industries, Inc. The breakdown of this fund’s portfolio is 31.7% in Information Technology, 18.2% in Consumer Discretionary, 17.3% in Health Care, 11.7% in Industrials, 9.8% in Financials, 5% in Energy, 4% in Cash and 2.4% in Materials.


2. T. Rowe Price New Horizons

T. Rowe Price funds are well known and recognized as one of the best in mutual funds industry. T Rowe Price offers over 90 no-load mutual funds investing in a selection of asset classes that are suitable for a range of investment objectives. The T. Rowe Price New Horizons fund investment objective is to provide long-term growth of capital by investing in common stocks of small but rapidly growing companies, preferably early in the corporate life cycle before the company is well recognized by the investment communities. The stock can be domestic or foreign stocks.

The year-to-date return of this fund is 24.94%. And it has returned 32.91% over the past one year and 3.22% over the past three years. The fund manager is Henry Ellenbogen. The expense ratio of this fund is 0.7% lower than the average in this category (1.55%). As of October 2010, the annual holdings turnover was 26.60%. There is no 12b1 fee and no sales load. Minimum initial investment for brokerage account is $2,500 and $1,000 for IRA account. This fund is available at around 78 brokerages, including Vanguard, JP Morgan, Schwab Retail and Fidelity Retail FundsNetwork.

As of January 2011, The New Horizons Fund had a total of 246 holdings with the 10 Largest Holdings are FMC Technologies, Factset Research Systems Inc, Henry Schein, MSCI, O'Reilly Automotive, Panera Bread, Rackspace Hosting, Roper Industries Inc, SXC Health Solutions and Waste Connections. Around 90.6% of the total net assets is allocated in domestic stocks, 4% in cash, 3.5% in foreign stocks, 1.5% in Convertibles, 0.3% in domestic funds and the remaining 0.3% in Preferred.


Wasatch Small Cap Growth Fund Holding
Wasatch Small Cap Growth Fund Holding | Source

3. Wasatch Small Cap Growth

The Wasatch Small Cap Growth Fund pursues long-term growth of capital by mainly investing in small companies and to provide income. The majority of asset (>80%) is invested in the equity securities of small companies with market capitalization of less than $2.5 billion. It creates a blend of “core” and “high growth” companies.

Portfolio Manager Jeff Cardon seeks the World’s Best Growth Companies since his joining in 1986. The expense ratio of this fund is 1.29%. There is no 12b1 fee and no sales load. The minimum balance to invest is $2,000 for brokerage account, $1,000 for IRA account, and a minimum of $100 for the subsequent investment. The load adjusted returns over the past three years are 2.11% and 7.98% over the past decade.

The top 10 companies in this fund as of January 2011 are Power Integrations, Inc.(3.90%), Ultimate Software Group, Inc. (3.50%), Hibbett Sports, Inc. (3.10%), MSC Industrial Direct Co., Inc. (2.50%), Knight Transportation, Inc. (2.40%), Peet's Coffee & Tea, Inc. (2.20%), MSCI, Inc., Class A (2.20%), Cognizant Technology Solutions Corp., Class A (2.20%), Hittite Microwave Corp. (2.20%) and Riverbed Technology, Inc.(1.90%). The fund allocated 78.5% of its assets in the U.S. The fund’s 19.1% of its market value is allocated in industrials, 18.1% in Information Technology, 15% in Consumer Discretionary, 12.5% in Cash and Cash Equivalents, 11.7% in health care, 10% in Financials and the remaining in energy, materials and consumer staples.


4. Federated Kaufmann Small Cap A

During the fourth quarter of 2010, Federated Kaufmann Small Cap Fund advanced 12.9%, while its benchmark, the Russell 2000 Growth Index has the advancement of 17.11%. The Federated Kaufmann Small Cap fund investment seeks to provide investors with capital appreciation by mainly investing in the stocks of small to mid-sized companies with positive growth characteristics. Most of the fund’s net assets are invested in the stock of small companies that are traded on national security exchanges such as NASDAQ, OTC, Russell 2000 Index or the S&P Small Cap 600 Index. And it may also invest some of its assets (30%) in foreign securities.

Under the management of Hans P. Utsch since 2002 and the other three team members, the fund has returned 21.47% over the past year and 2.46% over the past five years, with 20.40% year-to-date return. The minimum balance to invest is $1,500 for brokerage account and $250 for IRA account. The expense ratio of this fund is 1.95%, a bit higher than the 1.55% of the category average. This fund can be purchased from over than 110 brokerages, such as UBS Financial Services Inc., Morgan Stanley Advisors, Schwab Institutional, Scottrade Load and JP Morgan. Other class tickers of this fund are FKBSX, FKCSX and FKKSX. All of them have the same minimum investment for brokerage account. But FKKSX’s return is a bit higher among the others.

Top 10 holdings of this fund are CETIP SA, Dynavax Technologies Corp., Warner Chilcott PLC, US Airways Group, Inc., CLARCOR, Inc., Cubist Pharmaceuticals, Inc., Lululemon Athletica, Inc., RADWARE Ltd., Aramex PJSC and Con-way, Inc. The main composition of the portfolio is mainly in Information Technology (24.6%), Health Care (21.5%), Consumer Discretionary (17.6%), Industrials (16.1%), Financials (11.7%) and the remaining in consumer staples, energy, material, telecommunication services, utilities, cash and cash equivalents.


5. Baron Small Cap Retail

Baron Small Cap fund invests in a concentrated portfolio of small to mid-sized growth stocks. The fund invests in well-run small-cap growth businesses that are undervalue and have strong long-term growth potentials. It primarily invests in small companies with a market capitalization of < $2.5 billion.

While holding true to Baron Funds' underlying investment principles, portfolio manager Cliff Greenberg expands to look for classic growth companies (long-term growth potentials), fallen angels (have long-term franchises but have disappointed investors with short-term results) and special situations (spin-offs and recapitalizations). The expense ratio of this fund is 1.31%. The minimum balance to invest in either brokerage account or IRA account is $2,000. And this fund can only be purchased from limited 12 brokerages currently. The fund has returned 25.35% over the past one year and 8.24% over the past decade.

The top 10 holdings as of February 2011 are SBA Communications Corp., Penn National Gaming, Inc., TransDigm Group, Inc., Liberty Media Corp., Waste Connections, Inc., Gartner, Inc., Brookdale Senior Living, Inc., Iconix Brand Group, Inc., Equinix, Inc. and Concho Resources, Inc. While the sector breakdown of this fund is 23.6% in Consumer Discretionary, 20% in Industrials, 14% in Information Technology, 11.7% in Health Care and the remaining in energy, financials, materials, telecommunication services, cash, consumer staples and utilities.


Vanguard Small Cap Growth Index Fund Holding
Vanguard Small Cap Growth Index Fund Holding | Source

6. Vanguard Small Cap Growth Index Inv

This low-cost Vanguard Small Cap Growth index fund provides more exposure to small-capitalization U.S. growth stocks, which allows it to grow faster than the broader market. The Vanguard Small Cap Growth fund seeks to track a growth-style index of small-sized companies, MSCI US Small Cap Growth Index. The main risk is because the focus is on the small cap sector; it becomes more volatile than other market sector such as large cap. This fund is suitable for those who want to add a passively managed index fund with small-cap growth allocation to an already diversified portfolio.

Gerard C. O’Reilly has been the fund manager since 2004. With the total net assets of 7.20 billion, this fund has recorded a 21.15% of year-to-date return. There is no 12b1 fee and no sales load (front end sales load and deferred sales load). The minimum balance to invest in either brokerage account or IRA account is $3,000 with a minimum of$100 for the subsequent investment. This fund has returned 1.02% in the past three years and 4.89% in the past five years.

The top 10 holdings of this fund as of February 2011 are Riverbed Technology Inc., Gentex Corp., Informatica Corp., Signet Jewelers Ltd., Gardner Denver Inc., Solera Holdings Inc., E*Trade Financial, Tractor Supply Co., MICROS Systems Inc. and Atlas Energy Inc. These top ten holdings are equivalent to 4.4% of total net assets. The benchmark for this fund is Spliced Small Cap Growth Index and Dow Jones U.S. Total Stock Market Index.


7. Vanguard Explorer

Vanguard funds have been well known for long term investor for long time. Its index funds are well known for its low expense ratio. This Vanguard Explorer fund is an actively managed fund. Vanguard Explorer pursues to find small U.S. companies with growth potential. These companies tend to be unpredictable and have superior growth prospects. There is little or even no dividend income contributed by these companies most of the times.

The fund is managed by John J. Granaham since 1990. The fund expense ratio of 0.54% is quite low compared to the category average of 1.55%. There is no 12b1 fee and no sales load (both front end sales load and deferred sales load). The minimum balance to invest in the brokerage account and in IRA account is $3,000. With 0.28% yield, the fund has returned 27.72% over the past one year and 2.45% over the past five years. This fund can be purchased from 48 brokerages, including Vanguard Brokerage, Commonwealth PPS, JP Morgan, Ameriprise Brokerage, Fidelity Institutional FundsNetwork, etc.

The top 10 holdings as of January 2011 are VeriFone Systems Inc., Alliance Data Systems Corp., Kennametal Inc., Bruker Corp., Cooper Cos Inc., Rovi Corp., WMS Industries Inc., Coventry Health Care Inc., Ariba Inc. and Polycom Inc. These ten largest holdings are equivalent to 7.4% of total net assets. The benchmark for this fund is Russell 2500 Growth Index and Dow Jones U.S. Total Stock Market Index.


8. Prudential Jennison Small Company A

The Prudential Jennison Small Company fund investment seeks capital growth by investing > 80% of its asset in small, less well-known companies’ equities. This fund is part of the Prudential Investments family. These are mostly smaller companies with above-average growth potentials. In deciding which stocks to buy, it uses a blend of both value and growth styles. It considers small companies with market capitalization less than the largest of the Russell 2500 Index at the time of purchase.

John Mullman has been the fund manager since 2000. With the net assets of 2.14 billion, this fund recorded 49% of annual holdings turn over as of October 2010. The expense ratio of this fund is 0.89%. There is 0.30% of 12b1 fee and 5.50% of maximum front end sales load. The minimum balance to invest in this fund is $2,500 for brokerage account and $1,000 for IRA account. The fund performance has shown a 19.53% return over the past one year and 8.25% over the past ten years. Other ticker of this fund are Class B (CHNDX), Class C (PSCCX), Class Q (PJSQX), Class R (JSCRX) and Class Z (PSCZX).

The top 10 holdings which equivalent with 14.6% of the total assets is SBA Communications, Cavium Networks, Power Integrations, NTELOS Holdings, Stancorp Financial Group, Protective Life, Air Methods, Eaton Vance, Universal Health Services and Concho Resources. Top 4 market sector are Information Technology, Industrials, Financials and Health Care.


9. Alger Small Cap Growth A

This Alger Small Cap Growth fund seeks long-term capital appreciation by investing most of its net assets in equity securities of small companies with total market capitalization within the range of companies included in the S&P Small Cap 600 Index or the Russell 2000 Growth Index.

This fund is managed by Jill Greenwald, CFA, the Executive Vice President as well Portfolio Manager specialized in small capitalization stocks. With the expense ratio of 1.53%, the fund has returned 19.39% over the past one year and 3.42% over the past five years. Other class tickers for this fund are ALSRX and ASIRX.

The top 10 holdings for this fund as of January 2011 are Bearings Inc, Finisar Corp, Esterline Technologies, Genesee & Wyoming Inc-Cl A, Dana Holding Corp., Novellus Systems Inc., Shutterfly Inc., Solera Holdings, Nice Systems Limited Adr and Rockwood Holdings Inc. The top five sectors in this fund are Information Technology, Consumer Discretionary, Industrial, Health Care and Materials. Russell 2000 Growth Index and Lipper Small Cap Growth Index are the benchmark for this fund.


Invesco Van Kampen Small Cap Growth Fund Holding
Invesco Van Kampen Small Cap Growth Fund Holding | Source

10. Invesco Van Kampen Small Cap Gr A

The Invesco Van Kampen Small Cap Growth fund investment is seeking for capital appreciation by investing mainly in small companies stocks or equities with above-average prospects. Most of these small companies have the capitalization range of companies represented in the Russell 2000 Index for the past two years. As well it probably will invest up to quarter of its total assets in securities of foreign issuers and invest up to 10% of total assets in REITs.

Matthew Hart is the fund manager and he is responsible for the execution of the whole policy of the Fund. The minimum balance to invest in this fund, for either brokerage or IRA account is $1,000. This fund can be purchased from 98 brokerages such as TD Ameritrade, Inc., Northwestern Mutual Inv Srvc, LLC, CommonWealth PPS, Mutual Of Omaha Investor Services, Inc., etc. The expense ratio is 1.34%. There is 12b1 fee for as much as 0.25% and 5.50% on sales load. The fund has returned 17.81% over the past year and 2.24% over the past three years. Other class tickers for this fund are VBSCX and VISCX. Ticker VISCX has the lowest expense ratio (1.09%) among all.

The top 10 holdings of this fund as of January 2011 are Syniverse Holdings Inc., Landstar System Inc., Superior Energy Services Inc., Esterline Technologies Corp., Iesi Bfc Ltd, Oshkosh Corp., Svb Financial Group, Regal Beloit, Brookdale Senior Living Inc. and Uti Worldwide Inc.


11. Invesco Small Cap Growth A

The Invesco Small Cap Growth fund seeks long term capital growth. The fund invests most of its net assets in securities of small-capitalization companies included in the Russell 2000 Index at the time of purchase. It may invest up to a quarter of its total assets in foreign securities or equities.

The fund is managed by Juliet Ellis since 2004. The expense ratio of this fund is 1.31% which is lower than the category average expense ratio of 1.55%.There is 12b1 fee for as much as 0.25% and 5.50% on sales load. The minimum balance to invest in this fund is $1,000 for brokerage account and $250 for IRA account. The best 1-year return that was recorded in 1999 was 90.64%, now this fund has returned 2.94% over the past five years. Other class tickers of this fund are GTSVX, GTSIX and GTSYX. With the lowest expense ratio, GTSVX requires a minimum of $1,000,000 to open an investment in brokerage account, but it may be offered to institutional customer such as 401k account or IRA.

The top 10 equity holdings of this fund are Transdigm Group Inc., TRW Automotive Holdings Corp., Informatica Corp., Polycom Inc., Clena Corp., Regal-Beloit Corp., Finisar Corp., SBA Communications Corp., Williams-Sonoma Inc. and MicroSemi Corp. The list is as of January 2011. While the top five industries this fund involves in are application software, communication equipment, semiconductors, restaurants and oil & gas equipment & services. 


Disclosure: I have no affiliation with any of these funds. I also have no position in these funds. Please do your own research for additional details. Please trade and invest responsibly. Past Performance is No Guarantee of Future Results.


Fund Performance

(click column header to sort results)
Mutual Funds Description  
Ticker  
1 Yr  
3 Yr  
5 Yr  
10 Yr  
Lord Abbett Developing Growth A
LAGWX
31.39%
-1.61%
7.58%
5.43%
T. Rowe Price New Horizons
PRNHX
32.91%
3.22%
4.71%
6.88%
Wasatch Small Cap Growth
WAAEX
31.02%
2.11%
4.36%
7.98%
Federated Kaufmann Small Cap A
FKASX
21.47%
-4.63%
2.46%
n/a
Baron Small Cap Retail
BSCFX
25.35%
-2.65%
3.83%
8.24%
Vanguard Small Cap Growth Index Inv
VISGX
31.91%
1.02%
4.89%
7.63%
Vanguard Explorer Inv
VEXPX
27.72%
-1.19%
2.45%
5.40%
Prudential Jennison Small Company A
PGOAX
19.53%
-1.90%
3.59%
8.25%
Alger Small Cap Growth A
ALSRX
19.39%
-4.86%
3.42%
2.32%
Invesco Van Kampen Small Cap Gr A
VASCX
17.81%
-5.81%
2.24%
0.38%
Invesco Small Cap Growth A
GTSAX
18.73%
-3.11%
2.94%
2.16%
updated: 2/12/2011

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5 comments

LillyGrillzit profile image

LillyGrillzit 5 years ago from The River Valley, Arkansas

The information contained within this Hub is excellent. I know you must be an investment guru. I am so glad we ran into each other last summer. Your information enriches my life experience. I will have some ideas when/if I have enough to need investments. Thanks for the hard work


chan0512 profile image

chan0512 5 years ago from Camarillo, CA Author

Thanks Lilly!

Glad to know you as well last summer. More to come about mutual funds. And Thanks for your kind words. Hope this hubs is helpful for you.


Peter Owen profile image

Peter Owen 5 years ago from West Hempstead, NY

Good descrtiptions and overview. My favorite class over the years has been small cap value which has performed quite well. Currently I think Small caps are getting a bit toppy and I have been moving more into large caps.


chan0512 profile image

chan0512 5 years ago from Camarillo, CA Author

Peter,

Thanks for your kind words. I tend to like small growth or small blend especially for short to medium term investing. I think value class may be better for very long term 7-10 years or more investment.

You are right, Small caps looks a bit overbought aka toppy. This asset class can be very volatile in short term. Actually all domestic stocks asset class looks a bit toppy in my humble opinion. But I think the Fed is still pumping money, so this may continue for a while.

Though, I think small investors need to use caution as this progress further.


gepeTooRs 8 months ago

Howdy! Would you mind if I share your blog with my twitter group? ThereÕs a lot of folks that I think would really enjoy your content. Please let me know. Thank you

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