Best performing small cap mutual funds
A portfolio having a fair sprinkling of small and mid-cap stocks has tended to generate much better returns compared to a portfolio dominated by large cap stocks. Small companies having a healthy product mix tend to outperform the stock market over a 3-5 year time horizon. If you are lucky to enter a stock in its initial development cycle, like smart private equity players do, you can ride the company’s boom cycle with hefty profits in the bargain.
A small cap stock is broadly speaking a company with a market capitalization of less than $800 million and a small cap mutual fund is one whose primary objective is to invest in small cap stocks. Based on the search criteria given below, the following funds emerged in the five-star Morningstar-rated funds.
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Search criteria
Morningstar category small growth
Minimum initial purchase up to $3000
Expense ratio less or equal to category average of 1.59%
Rating 5-star
YTD return equal or greater than category average of 16.70%
Net assets less than or equal to $5billion
*all data as on August 18, 2009
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Baron Growth(Symbol-BGRFX)- This small growth fund was launched in December 1994 and its fund manager, Ron Baron, has been at the helm since January 1995. It has $4.9 billion assets under management. It is a no-load fund with an initial investment limit of $2000. Its performance took a big dip in 2008 when most funds fared poorly but the fund has recovered well since then and the year-to-date return of 18.77% compares favorably with the category average of 16.7%.
The fund’s NAV (net asset value) as on August 18, 2009 was $36.55 while its 52-week NAV range is $23.73-$46.29. The fund’s top holdings are DeVry Inc (NYSE: DV), Strayer Education Inc (Nasdaq: STRA), Edwards Lifesciences Corporation (NYSE:EW), AECOM Technology Corporation (NYSE:ACM) and ITC Holdings Corporation (NYSE:ITC). An investment of $10,000 into this fund at the beginning of the current year is now worth $11,877.
Buffalo Small Cap(Symbol-BUFSX)- This small cap growth fund launched in April 1998 is jointly managed by Kent Gasaway, Robert Male and Grant P.Sarris and has $2.2 billion assets under management. It has been a steady performer for the last three to four years. Its YTD return at 28.59% and it has topped its category in the 1-year return.
Its top five holdings include ITT Educational Services Inc (NYSE:ESI), Fidelity Institutional MM Fds Government I (, Corinthian Colleges Inc (Nasdaq:COCO), WMS Industries Inc (NYSE:WMS) and Panera Bread Company Inc A (Nasdaq:PNRA). An initial investment of $10,000 in the current year is now worth $12,859.
Its NAV as on August 18, 2009 was $21.05 and its 52-week range is $12.42-$22.34. The minimum investment limit for this no-load fund is $2500.
Wasatch Small Cap Growth(Symbol- WAAEX )- Wasatch Small Cap was launched in August 1986 with Jeff Cardon as its fund manager since inception. It has $722.3 million assets under management. With a YTD return of 29.61% its rank has moved up to 3 in the small growth category based on its one-year return.
Its NAV as on August 18, 2009 was $26.70 with 52-week NAV in the range of $16.32-$30.22. The minimum investment limit for this no-load fund is $2000.
Its top five holdings include O’Reilly Automotive Inc (Nasdaq:ORLY), Resources Connection Inc (Nasdaq:RECN), Techne Corporation (Nasdaq:TECH), HDFC Bank ADS (NYSE:HDB) and MSC Industrial Direct Co. Inc (NYSE:MSM). An initial investment of $10,000 in the current year is now worth $12,961.
The small cap growth funds listed above are among the best available in the category under review. You can screen for more well-managed funds based on your investment criteria. Check this out at Morningstar.com.