"Partly as a hangover from what happened in 1995 to 1999, value stocks are the ones that tend to be held," he says. "It was a very good category to be in the last five years."
Motola, however, feels growth is undervalued based on historical benchmarks, and robust earnings growth among the S&P 500 companies point to a sector headed for a rebound. Motola's fund brought a return of 14.50% in 2004, and has an annualized rate of return of 11.03% over the past three years.
As a multicap fund that focuses on company fundamentals, the Thornburg
Core Growth Fund has the ability to bring a broad diversity of holdings
into the fold, Motola says. The fund's current holdings range from
large caps such as Microsoft and Comcast, to small caps such as
Gamestop and Imax Corp.
The fund looks for growing companies in growing industries, usually
those with a dominant position in the marketplace, he says. That
accounts for the fund's purchase of Microsoft and Comcast, the latter
of which Motola saw as an industry leader because it led competitors in
capital improvements of its network.
"They got the vast majority of spending behind them," he says.
Part of a cable television industry that has been largely shunned by
investors in recent years, Comcast was trading at around $33 in
mid-March, up from $26 per share last fall.
The fund bought Imax in September, after the company had lowered the
cost of the technology and dramatically lowered the cost of formatting
movies for showings in Imax theaters. The company was at about $10 in
mid-March, up from a low of $4 per share a year earlier.
Motola feels his fund uses the type of fundamental analysis that was
hard to find among growth managers in the late 1990s. "I think the
industry has changed for the better," he says. "Now they are doing the
things they should have done all along," he says-more in-depth
analysis, field checks and less reliance on Wall Street research."
Bernard Myszkowski, co-portfolio manager of the ABN Amro Growth Fund,
has been able to attain a 12.68% annual rate of return over the past
ten years. The fund, whose holdings include Cardinal Health, Starbucks,
Dell and Oracle, tries to invest for the long term and avoids "trying
to catch a quick move that will pump it up in three weeks."
"Our definition of growth," he says, "is we're looking for careful
stock selection of high quality companies with strong fundamentals that
can grow faster than the S&P," he says.