Loading...

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 reduce 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.  For the 10-year period ended August 31, 2012, the group had an annualized gain of 6.0%, while the S&P 500 reported an annualized gain of 6.5%.  For five years and three years, the group had annualized returns of -0.2% and 10.2%, respectively, while the S&P 500 reported annualized gains of 1.3% and 13.6% respectively.  During the past year, the Aggressive Growth objective group underperformed, and reported a return of 8.7%, below the S&P 500, which had a return of 18.0%. Also, year to date through August 31, 2012, the group reported a gain of 8.8% compared with a gain of 13.5% 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 the highest year-to-date return through August 31, 2012 is ProFunds UltraNASDAQ-100 Fund (UOPIX). This fund seeks, on any single day, twice the return of the NASDAQ-100 Index. This index includes 100 of the largest non-financial domestic and international issues listed on the NASDAQ Stock Market.

To achieve this objective, the fund invests primarily in common stocks of companies in the NASDAQ Index, as well as in derivatives as a substitute for investing in stocks, in order to gain leveraged exposure to the Index. Further, the fund uses a mathematical approach to investing. This mathematical model determines the type, quantity, and mix of investment positions that the fund should hold to approximate twice the performance of its benchmark. 

Another fund with the third highest year-to-date return through August 31, 2012 is Profunds UltraBull Fund (ULPIX). This fund’s objective is to achieve twice the return of the S&P 500 Index on a daily basis. 

The fund invests in a combination of equity securities and derivatives that will achieve their objective. Further, the fund uses a mathematical approach to investing. This mathematical model, very similar to the one used in the ProFunds UltraNASDAQ-100 Fund (UOPIX), determines the type, quantity, and mix of investment positions that the fund should hold to produce twice the returns of its benchmark. Any assets not invested are typically held in money market instruments.

A third fund with a very good return is Hartford Growth Opportunity Fund A (HGOAX). Management primarily invests in a diversified portfolio of common stocks covering a broad range of industries, companies, and market capitalizations, although its primary focus is large and mid-cap stocks. The fund seeks those companies it believes has superior growth potential. It may also invest up to 25% of its assets in foreign issues and non-dollar securities. To help achieve aggressive growth, the fund may trade securities actively. As of January 30, 2012, the fund reported a high turnover rate of 121%.

As of August 31, 2012, the fund’s portfolio was about 94% invested in common stocks. As of the same date, U.S. stocks comprised about 90% of total assets, with the balance in foreign issues. As of the same date, the top 10 portfolio holdings accounted for 30% of its total assets, while it held common stock in 78 companies.

 

 

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

ProFunds UltraNASDAQ-100  

UOPIX

45.87

10.24

19.75

10.15

4.56

Rydex S&P 500 Strategy A

RYTTX

25.32

4.33

15.10

6.05

-7.66

Profunds UltraBull

ULPIX

24.47

4.21

14.81

5.52

-7.79

Hartford Growth Opportunity A

HGOAX

21.86

3.47

8.92

4.82

-0.03

Rydex NASDAQ 100 A

RYATX

21.72

5.02

9.80

5.67

6.11

  

Profunds NSADAQ 100

OTPIX

20.77

4.96

9.52

5.06

5.74

  

Rydex Nova A

RYANX

19.30

3.20

11.52

5.16

-2.86

PRIMECAP Odyssey Aggressive Growth

POAGX

19.23

2.57

12.31

8.06

5.64

Eagle Capital Appreciation A

HRCPX

17.67

4.17

8.47

3.93

1.84

Rydex Russell 2000 2X Strategy A

RYRUX

17.64

6.49

12.70

-1.14

-9.63

Aggressive Growth Objective Group

  

8.79

2.39

4.79

-0.03

-0.17

  

  

  At the time of this article's writing, the author did not have positions in any of the companies mentioned.