2 Skilled Large-Growth Managers for Buy-and-Hold Investors
Bronze-rated Wells Fargo Advantage Growth's smaller-cap focus could mean higher returns but more volatility, too, while Silver-rated MFS Growth's quality tilt offers a smoother ride.
Andrew Daniels: Silver-rated MFS Growth (MFEGX) and Bronze-rated Wells Fargo Advantage Growth (SGRAX) are both in the large-growth Morningstar Category and have strong teams with established processes, but there are several differences to be aware of.
Wells Fargo Advantage Growth concentrates more on small- and mid-cap firms. It has about 45% of assets in small- and mid-cap firms, as compared with about 9% for MFS Growth. Given Wells Fargo Advantage Growth's smaller-cap tilt, investors should expect it to be a bit more volatile than MFS Growth but may be compensated with additional returns in the long run.
MFS Growth tends to have better-quality metrics, such as lower debt-to-capital ratios and higher return on invested capital. This quality tilt should help MFS Growth hold up better during downturns compared with Wells Fargo Advantage Growth. MFS Growth also has lower fees than Wells Fargo Advantage Growth and, hence, earns a Price Pillar rating of Positive, while Wells Fargo Advantage Growth has a Price Pillar rating of Neutral.
Both funds are solid, long-term growth options. Investors willing to stomach the volatility, perhaps in exchange for higher returns, will find much to like with Wells Fargo Advantage Growth, but those looking for a safer ride would be better suited to MFS Growth.
Andrew Daniels does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.