From CBS MarketWatch: Fund Manager names WPI as "creme de la creme."
A reluctant home run hitter
Wilshire's Stevens tries to own large caps
By Don Scott, CBS MarketWatch
Last Update: 3:03 PM ET Oct 19, 1998
Columns & Opinion
NEW YORK (CBS.MW) -- One way to consistently beat the S&P 500
is to forget about finding a small number of "home run" type of stocks and
try to own large cap growth stocks as a category.
That's the essence of the strategy Thomas Stevens uses in managing the
Wilshire Target Funds Large Company Growth Portfolio (DTLGX).
The fund is one of only 11 mutual funds that have managed to do better
than the S&P 500 over the last 5, 3, 1 and year-to-date periods through
the end of September, according to the Morningstar Principia Pro
database. And going into this week the fund was up 15.9 percent
year-to-date against the S&P 500's 8.86 percent gain.
"The irony is that we're not trying to be a home run hitter, and we're
showing up with some really attractive rankings," said Stevens. "But that is
not our goal. Our goal is to do a good job capturing what the category in
the aggregate is doing."
Wilshire's top 10 holding: General Electric (GE); Microsoft (MSFT);
Coca-Cola (KO); Merck (MRK); Wal-Mart (WMT); Intel (INTC);
Pfizer (PFE); Procter & Gamble (PG); Johnson & Johnson (JNJ); and,
Bristol Myers Squibb (BMY).
Big leagues
What they do is take the Wilshire 5000 Index, pull
out the 750 companies with the largest market
capitalizations, and from that draw between 220
and 250 stocks. By contrast, Stevens figures most
active portfolio managers have less than 100 stocks
in their portfolios. Some even concentrate on 20 or
30 stocks.
"Most growth managers are more interested in
refining their list to a smaller subset, thinking that
you need to get to a smaller group of names in
order to come up with an attractive performance
profile, but in paring down your list, you might
actually be undermining your ability to capture what
the category in the aggregate can provide," he said.
Stevens uses Wilshire's computers to rank the
classic fundamentals; such as earnings growth and
sales growth, and he buys those companies whose
fundamentals usually fall in the top 25 or 30
percent.
"We don't care about expectations relative to what the analysts opinions
are. We're not playing that game. We're looking at things in a purer sense,
in a fundamental sense.
"It's simply a matter of 'does this company rank among its peers as a good
growth name given its most recent earnings and sales report, its return on
equity, and its financial strength'," he added.
The fund is always fully invested, so that investors who use it in an asset
allocation approach to investing can always count on whatever they
allocate to large cap growth actually being in large cap growth. That
means new money coming in always has to be invested.
Here's some of the crème de la crème of Steven's latest sorting of his
database. These are stocks with earnings growth rates ranging from 12
percent to 70 percent, and sales growth rates of 9 percent to 81 percent:
Dollar Tree Stores (DLTR), Apollo Group (APOL), Oracle Systems
(ORCL), Cisco Systems (CSCO), Watson Pharmaceutical (WPI), Dell
Computer (DELL), Cambridge Tech Partners (CATP), Bed Bath &
Beyond (BBBY), Microsoft, Tellabs (TLAB), Robert Half (RHI),
Solectron (SLR) and Paychex (PAYX). |
