Large-cap mutual funds outperformed small-cap and midcap funds over the past three years.
Why? Amid slow global economic growth, investors sought the relative safety of stocks in bigger companies with deeper pockets. Those firms are better positioned to withstand whatever unpleasant shocks the markets unveil. Also, those bigger companies can gobble up smaller rivals that fall on hard times. And U.S. large caps have looked attractive amid doubts about GDP growth in other developed markets.
As a group, large-cap mutual funds notched an 8.41% average annual gain over the past three years. That easily outran their midcap rivals’ 6.97% average annual return. And it walloped the 5.51% average annual advance posted by small-cap funds.
If you have bet solely or more heavily on large-cap funds than the other categories in recent years, it would have been a boon to your overall portfolio and retirement planning.
Amid broad market volatility — stemming from woes in the oil patch, worries about weakened energy companies’ impact on their lenders and doubts about China’s growth — this year alone has been tough. Only midcap funds as a group are in positive territory, up a meager 0.45% vs. a 0.13% setback for large-cap funds and 0.79% slide by small caps.
Over the entire three years, if you had invested $10,000 in a cross section of large-cap funds on March 31, 2013, by now it would be worth $13,296.
The same amount would have grown to $12,683 in the average midcap fund and $12,100 in the average small-cap funds.
The $3.17 billion AB Large Cap Growth Fund (APGAX) — run by the firm that used to be known as AllianceBernstein — was one of the top-performing large-cap funds over the past three years. It racked up a 14.38% average annual gain.
In that same span, the S&P 500 averaged a 10.41% annual gain.
Talk about sizzle, AB Large Cap Growth is an IBD Best Mutual Funds 2016 Awards winner for outperforming the S&P 500 over the one-, three-, five- and 10-year periods ended Dec. 31.
Fund manager Frank Caruso discussed his investment approach in detail recently in an IBD fund manager question-and-answer feature report.
One of his recent holdings is lighting products maker Acuity Brands (AYI), which has helped the fund turn up the wattage on its performance. Its LED products are seeing strong demand.
Share price is up 42% over the past 52 weeks.
Around midday Friday, Acuity Brands was in a buy range from a 242 alternate entry, but it remained extended from a prior 225.28 buy point. The stock has held above a key test of the 240 price level.
The stock has a 99 Composite Rating from IBD. The Composite Rating combines IBD’s five performance ratings, including EPS and Relative Strength ratings, with 99 being the highest.
On Dec. 10, Acuity completed its acquisition of Juno Lighting Group, a maker of LED-based down- and track-lighting fixtures.
On April 6, Acuity reported profit in the February-ended fiscal second quarter of $1.80 a share. That was up 53% and nicely above the consensus estimate of $1.51. Sales rose 26% to $777.8 million. Analysts were modeling $752.3 million.
Earnings per share rose 29% and 24% in the prior two quarters. The stock’s dividend yield is 0.2%.
Adobe Systems (ADBE) is another holding with a strong Comp Rating, in this case 91. Shares are up 25% in the past 52 weeks.
Early afternoon on Friday, Adobe Systems was closing in on a 98.10 cup-with-handle buy point, IBD’s markets team noted. Volume had dried up as the handle formed, which is positive. An earlier breakout past an 88.65 handle entry within the base was successful, and from that point of view, the stock was extended.
However, you could argue that the right side of the stock’s base needed more work.
The image-editing and PDF-software giant has made a successful transition in allowing customers to receive products through the cloud and pay a subscription fee.
Adobe’s fiscal second quarter ends in May. Wall Street sees earnings rising 42% to 68 cents a share. That would extend the slowdown in EPS gains, which grew 30%, 93%, 59% and 50% in the prior four quarters, but still represents robust profit growth
Dental products firm Align Technology (ALGN) is up 29% over the past 52 weeks.
EPS grew 25% and 32% the past two quarters. Prior to that, EPS shrank for four straight stanzas.
The company’s products are used to treat the misalignment of teeth. American teens and overseas markets give the teeth-realignment expert opportunities.
The stock has a 99 Comp Rating.