Mutual fund managers have been predicting and hoping for a pick up in the growth arena for more than a year now, and finally, in 2005, growth funds are beating value, and fund managers are arguing that this new trend will continue well into 2006, according to Business Week Online."Our bet right now is on growth stocks," says Gina Sanchez, manager of the American Century Investments' Strategic Asset Allocation Funds.
Investors, who have focused on growth in previous years, have a long way to go when it comes to making up for all the years of losses. On the other hand, those who have a well-diversified portfolio, mixing growth, value, small-cap and large-cap, should not be complaining because the average U.S diversified fund rose by 7.7% this year, which is higher than the 5.7% return for the S&P 500-stock index through Dec. 9.
Managers forecast that among growth funds, larger companies will be in the spotlight in 2006, following years of smaller companies outperforming larger ones. The reason is because many large companies have gotten their finances under control in the past few years.
With growing interest rates, smaller companies are losing momentum.
"At some point, higher interest rates will hurt smaller firms that are more prone to higher funding costs," said Robert Stimpson, co-manager of the Rock Oak Core Growth Fund
Growth fund managers have really been eyeing technology stocks, which have done a complete turnaround since the stock market crash in 2000.
"For the first time in quite a while, we are on the verge of a decent cycle in [information technology] spending," says Scott Schoelzel, manager of the Janus Twenty and Janus Forty funds.
Managers have been eying software releases, semiconductor companies and blue chip devices have been looking appealing to managers.
"When you look at all of the hot new products, including iPods and cell phones, all of them are using applications that require chips," John Wallace, portfolio manager of the RS MidCap Opportunities Fund, says.
High energy prices are creating some opportunity, like the coal business, which is up because natural gas is very expensive.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.