Marsico Focus

Age: 54

Credentials: BA in science, University of Colorado; MBA, University of Denver

Experience: Portfolio manager, Marsico Focus (1997-present); chief investment officer, Marsico Capital Management (1997-present); portflio manager, Janus Capital Management (1986-1997); analyst, Fred Alger Management Inc. (1982-1986); analyst, Boettcher & Co. (1979-1982)

Ticker: MFOCX

Inception of Fund: December 1997

Style: Large growth

Assets under management: $2.1 billion

Three- and five-year performance as of Oct. 14: -3.3% and 3.06%

Expense ratio: 1.21%

Front load: None

Minimum investment: $2,500

Alpha: 1.92% vs. Standard & Poor’s 500

During times of market turmoil, the distinction between growth and value often blurs. Once-heady growth names regularly find their way into value portfolios and value fare makes it onto the buy lists of growth managers.

That’s nothing new to veteran growth investor Tom Marsico, manager of the eponymous Marsico Focus Fund, who has been practicing this type of growth investing for years. Marsico has always been on the lookout for companies with superb earnings potential and innovation, but he has remained mindful of the price at which these stocks are selling too.

In early 2000, for example, he famously sold shares of Qualcomm, designer of CDMA chipsets, when its stock price advanced 2,200% in a single 12-month period and its price-to-earnings ratio reached 309, believing—rightly, in the end—that such a valuation could never be sustained. He didn’t sidestep the tech burst entirely, but he managed to shield his fund from the worst of the 2000-2002 meltdown. In an ironic twist, Marsico owns shares of Qualcomm now, but at a much more tepid 18 times estimated 2010 earnings.

Over the years, financial stocks, often seen as the domain of value managers, found their way into the portfolio. Again, he presciently sold many of these names in late 2007, when he became uncomfortable with the risk on some banks’ balance sheets. Marsico loaded up on financials again late last year.

The fund’s behavior during the meltdown and recovery validated Marsico’s approach. Over the past five years, through Oct. 14, Marsico Focus is up 3.1% a year annualized, beating out 72% of large-cap growth funds, according to Morningstar. Over the last 10 years, it is up 0.44%, besting 78% of its large-cap growth competitors.

A SLOW TURNABOUT

Since the market bottom in March, however, Denver-based Marsico Focus has not kept pace with its peers, something Marsico attributes to the market’s preference for the very stocks that were most beaten up during the rout. “The stocks that performed very well early in the year were lower-quality technology companies, Nasdaq-type companies,” Marsico notes, pointing to the Nasdaq’s nearly 17% return in the first half of the year, compared with the S&P 500’s 1.7%. “But we had a greater position in the financial services stocks, which up until the last three or four months, were lagging what was happening in the Nasdaq.”

Things began to change in the third quarter as many of these stocks finally received their due. At 22% of the fund’s asset base, the financials carry a lot of sway. In that quarter alone, Marsico Focus advanced 16.5%, placing it in the top 21% of large-cap growth offerings tracked by Morningstar.

That’s a slot that Marsico is more used to occupying. As the skipper of Janus Twenty in the late 1990s, he oversaw the fund’s meteoric rise, which paralleled the Nasdaq-infused tech bubble. He set out on his own in 1997 after his attempts to become co-chief investment officer of Janus reportedly failed.

For the last decade, Marsico has maintained his reputation as a star manager, so much so that Bank of America came calling in 1998 and bought the firm for $1.1 billion. (Two years ago, Marsico bought back his shop from the bank, but at a sizable premium of $2.7 billion, saying he no longer needed BofA’s retail distribution capabilities, the original purpose of the sale.)

THREE FACES OF GROWTH

To construct the portfolio of 20 to 30 names, Marsico divides stocks into three types of growth investments. About 60% of the portfolio is so-called core growth, companies that promise consistent growth over the next three to five years. McDonald’s and IBM are two such examples.