Growth fund managers typically seek out companies whose earnings increase 10% or more a year, but with the economy sagging, those managers are applying metrics theyve never used before, The Wall Street Journal reports.
Only a quarter of the companies in the Standard & Poors 500 Index are expected to post returns that high this year, down from 50% last year. Likewise, dividend growth funds are having a hard time finding suitable securities.
Robert Bartolo, manager of the T. Rowe Price Growth Stock Fund, said that given todays market conditions, he is actually seeking out value stocks whose outlook or market share is poised to rebound. Last year, for instance, Bartolo held traditional growth stocks, and his fund fell 42%, five percentage points below the market. Since unloading traditional growth stocks, however, the fund managers performance has improved, declining 12%, a full 12 percentage points above the S&P 500.
You have to look a little harder right now, explained Will Danoff, manager of Fidelity Contrafund.
