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Value Line’s Aggressive Growth objective group is, by design, broadbased. It is meant to house any equity fund that invests predominantly in higher-risk common stocks or that has a stated policy of maximum growth without regard to income or time horizons. This clearly covers a lot of ground.

Note, however, that funds with specific market capitalization specializations and those that invest in narrow industries are often placed into other, more appropriate, objective groups.  For example, funds with a focus on small companies are more appropriate in the Small Company objective group for comparison purposes.  

That said, there is often a very fine line between a fund that falls into the Aggressive Growth objective and any number of other objectives, including Growth and Small Cap.  Much ultimately depends on a judgment call.

The names of the funds in this group don’t normally have the word aggressive in them, though some do. One overriding feature, however, is the level of risk that managers here are willing to accept. Thus, a fund with the word “value” in its name might very well find its way into this objective group because it invests extensively in turnaround situations—an aggressive tactic that materially increases both risk and potential reward.

Very often, the funds in this objective group have concentrated portfolios. While some argue that these types of funds concentrate investment in a manager’s best ideas, it is undeniable that a smaller number of holdings also reduces diversification—which often increases risk. These types of funds can have the terms “select,” “focused,” or “concentrated” in their names to denote the relatively small number of holdings, though that is not always the case.

Included in this category are funds that are designed to outperform an index, such as the S&P 500 Index, NASDAQ, or The Dow Jones Industrial Average, by a margin of two or, in some cases, three to one. These funds are designed to outperform an index by going up twice as fast, for example, as the S&P 500.  Such funds use leveraged instruments, including equity index swaps, futures contracts, and options to achieve their required results. This type of fund allows individual investors to hedge at least a percentage of their investment portfolio as an alternative to selling a fund when prices appear to be high.  As an example, such funds can also be used to hedge an individual retirement account portfolio.  Losses in an IRA cannot be deducted from ordinary income, so such hedges help protect gains.

Over the long term, the Aggressive Growth objective group has been a decent performer relative to the broader market, as measured by the S&P 500 Index.  For the 10-year period ended February 29, 2012, the group had an annualized gain of 3.6%, while the S&P 500 reported an annualized gain of 4.2%.  For five years and three years, the group had annualized returns of 1.2% and 22.9%, respectively, while the S&P 500 Index reported annualized gains of 1.6% and 25.5% respectively. During the past year, the Aggressive Growth objective group reported a return of 0.3%, but not as well as the S&P 500 Index, which had a return of 5.1%.  Also, year to date through February 29, 2012, the group reported a gain of 8.8% compared with a gain of 9.0% for the Index. The group has an average Risk Rank of 3, indicating that funds in this group might appeal to a broad range of investors. That said, as the stock market continues to seesaw, funds with concentrated portfolios may be quite volatile.

One fund with an excellent year-to-date return through February 29, 2012 is Rydex Russell 2000 2x Strategy Fund A (RYRUX). The fund seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The fund’s current benchmark is 200% of the performance of the Russell 2000 ® Index (the “underlying index”). The fund does not seek to achieve its investment objective over a period of time greater than one day.

The fund invests in the common stock of companies that are generally within the capitalization range of the underlying index. It also has exposure to certain derivative investments traded in the over-the-counter (“OTC”) market. The fund holds U.S. Treasuries or cash equivalents to collateralize its derivative positions. In an effort to ensure that the fund is fully invested on a day-to-day basis, it may conduct any necessary trading activity at or just prior to the close of the U.S. financial markets.

The fund’s concentration in a particular industry is adjusted to meet that of the underlying Index. The fund is non-diversified and, therefore, may invest a greater percentage of its assets in a particular issuer in comparison to a diversified fund.

Another fund with a relatively good return is SunAmerica Focused Multi-Cap Growth Fund A (FICGX). This fund seeks long-term growth of capital.

The fund’s principal investment strategies are “focused” and growth. It invests in securities with a historical record of above-average earnings growth; significant earnings growth potential, proven products or services, and in industries experiencing rising demand. 

The focus philosophy reflects the belief that, over time, the performance of most investment managers’ “highest confidence” stocks exceeds that of their more diversified portfolios. The fund will generally hold between 30 to 50 securities, although an adviser may, in its discretion, hold less than 30 securities. Examples of when the fund may hold more than the specified number of securities include, but are not limited to, re-balancing or purchase and sale transactions. 

Management may invest in additional financial instruments for the purpose of cash management or to hedge a security portfolio position. The principal investment technique of the fund is active trading of equity securities of companies of any market capitalization that offer the potential for long-term growth of capital. 

A third fund with a relatively good year-to-date return is Hartford Growth Opportunity Fund A (HGOAX). This fund seeks capital appreciation.

Under normal circumstances, the fund invests primarily in a diversified portfolio of common stocks covering a broad range of industries, companies, and market capitalizations that the sub-adviser, Wellington Management Company, LLP (“Wellington Management”), believes have superior growth potential with a focus on mid- to large-capitalization stocks. The fund may invest up to 25% of its total assets in foreign issuers and non-dollar securities. Wellington Management uses fundamental analysis to identify companies with accelerating operating characteristics for purchase.


In the table below, we have listed 10 top-performing funds through February 29, 2012 that we follow in our Fund Advisor database.

 

Top 10 Aggressive Growth Funds Performance

 

Fund Name

Ticker

% Year-to-date

Total Return

% 1 Month

Total

Return

% 3 Month

Total

Return

% 6 Month

Total

Return

% 5 Year

Total

Return

Annualized

Rydex Russell 2000 2X Strategy A

RYRUX

19.00

4.23

19.36

16.93

-10.30

Rydex S&P 500 2X Strategy A

RYTTX

18.17

8.50

20.09

23.60

-7.58

Rydex MidCap 1.5X Strategy A

RYAHX

17.09

6.58

15.90

16.05

-0.09

SunAmerica Focused Multi-Cp Gr A

SSAAX

16.74

7.97

16.53

13.00

1.52

  

Hartford Growth Opportunity A

HGOAX

16.25

6.70

12.36

10.16

2.14

  

Needham Aggressive Growth Fund

NEAGX

15.91

4.73

17.36

18.86

8.10

Rydex NASDAQ -100 A

RYATX

15.19

6.36

14.14

16.76

7.57

Federated Kaufmann A

KAUAX

14.84

6.38

13.93

8.92

1.04

RidgeWorth Agg Growth Stock A

SAGAX

14.94

5.42

11.72

9.46

5.41

MassMutual Sel Aggressive Growth A

MMAAX

14.78

8.25

14.78

16.11

6.44

Aggressive Growth Objective Group

  

8.83

3.78

7.95

8.72

1.23

  

At the time of this report's issuance, the author did not have positions in any of the funds mentioned.