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Funds Betting on Apple, Google, and RIM

Many funds' fortunes have turned amid these stocks' volatility.

David Kathman, 02/26/2008

So far, 2008 has been a terrible year for lots of big-name growth stocks, including many that posted big gains last year. Such reversals of fortune are hardly new for such stocks. Large-growth stocks, especially big technology and telecom names, were the biggest drivers of the market bubble of the late 1990s, but since the bubble burst they've mainly put up lackluster returns, even when other areas of the market were thriving. Those stocks finally seemed to be coming to life again last year, when lots of people started to see large-growth stocks as relatively safe havens from the subprime-mortgage crisis. However, fears of a recession have caused most cyclical growth stocks to plunge again in the past few months.

Among the best illustrations of this pattern are three of the most prominent growth stocks out there: Apple AAPL, Google GOOG, and Research in Motion RIMM. Apple was up an eye-popping 134% in 2007, when its iPhone became a big success and iPods continued to sell like hotcakes, but it's down 38% so far this year (through Feb. 20) because of fears that consumer spending is slowing. Google was another big gainer last year, up 50% as it maintained its rapid growth and solidified its dominance in online advertising, but it has fallen 26% this year. Research in Motion gained an impressive 166% in 2007 on the continued popularity and profitability of its BlackBerry devices, but so far this year it's down 14%, due to the same types of concerns weighing down Apple.

All three of these stocks are very widely held by growth-oriented mutual funds, so their rise and fall has had a significant effect on fund performance. We thought it would be interesting to see which diversified funds have the biggest combined stakes in Apple, Google, and Research in Motion. We left out index funds, including many tracking the Nasdaq 100 index, and specialty-technology funds. We also omitted those funds that are clones of other funds on the list.

Here are the top 10 funds according to those criteria. In addition to each fund's category, size, and combined percentage of the portfolio in Apple, Google, and RIM, we also show its percentile ranking within its category for two periods--2007, and 2008 for the year to date through Feb. 20.

 Funds with the Biggest Combined Apple, Google, RIM Stakes
Company
Category
Size
($ Mil)
Apple
Google
RIM
(%)
% Rank
in 2007

% Rank
YTD*

Fidelity Advisor Growth Opp FAGOX
Lg Growth
2,560.7
23.23
9 95
Black Pearl Focus
Mid-Growth
4.8
22.97
36 96
Janus Twenty JAVLX
Lg Growth
11,642.2
21.90
1 13
Transamerica Premier Focus TPAGX
Mid-Growth
84.7
21.23
26 97
Fidelity OTC FOCPX
Lg Growth
7,390.5
20.03
7 99
Edgewood Growth EGFIX
Lg Growth
157.2
18.87
13 28
Touchstone Sands Cap Sel Grth PTSGX
Lg Growth
510.5
16.70
23 94
Morgan Stanley Focus Growth AMOBX
Lg Growth
2,668.1
16.44
12 74
MassMutual Select Agg Growth MMAAX
Lg Growth
510.3
15.87
27 90
SunAmerica Focused Lg Cap Gr SSFAX
Lg Growth
718.8
15.50
34 78
* As of 2-20-2008.

The most striking thing about this table is the stark difference between these funds' performance last year and this year. Last year, all of them easily beat their categories, with three ranking among the top 10%. So far this year, eight of the 10 are trailing their categories, with six of them in the bottom 10%. Many of these funds have all three stocks among their top 10 holdings, alongside other stocks that have followed a similar pattern. Fidelity Advisor Growth Opportunities FAGOX is a case in point--its top holding as of Dec. 31 was Google, in which it had a 13% stake, and RIM and Apple were number three and number six, respectively. Its second-largest holding, Valero Energy VLO, was up 38% in 2007 but is down 12% this year, and its seventh-largest holding, Chicago Mercantile Exchange CME, was up 35% last year and is down 24% this year.PAGEBREAK

The two funds on the list that have bucked the trend are the giant Janus Twenty JAVLX and the tiny Edgewood Growth EGFIX. Janus Twenty was one of the best-performing large-growth funds last year under longtime manager Scott Schoelzel; however, Schoelzel left Janus at the end of the year. Former Janus Orion JORNX manager Ron Sachs is now in charge, and he has helped the fund hold up reasonably well despite having RIM, Google, and Apple among its five largest holdings. Top holding Potash Corporation of Saskatchewan POT has actually gained for the year, as have several other holdings, such as Celgene CELG. As for Edgewood Growth, its concentrated portfolio of 22 stocks includes a number of health-care names that have done relatively well, including Genzyme GENZ and Gilead Sciences GILD, and relatively few stocks (beyond the big three) that are down by double-digit percentages this year. In this tough market, that has been enough to stay ahead of the pack.

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