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This month we take a look at six of our higher-rated
funds in the small-growth Morningstar Category.
This article is about tracking performance, so I hope
you’ll forgive me for including three funds that are
closed to new investors. Funds that are closed are a
big part of the small-cap fund world, and I would
be remiss if I left these three out. Besides, these funds
may reopen, and you might get another shot if you
missed them last time.
Brown Capital Management Small Company
BCSIX
The managers of this closed fund, which has a
Morningstar Analyst Rating of Gold, won Morningstar’s
Domestic-Stock Manager of the Year award for
2015
,
and you can see why from their record. The fund’s
five-year returns of
15
.
4%
annualized,
10
-year returns
of
13
.
3%
, and
15
-year returns of
9
.
3%
beat most
of its peers and the Russell
2000
Growth Index. Keith
Lee and team set the bar high by looking for durable
growth stocks with strong balance sheets. Not many
small caps fit the bill, but when they do, management
tends to hold on for the long haul.
Conestoga Small Cap
CCASX
This Silver-rated (and open) fund once again rewarded
shareholders who stayed with it after a slow patch.
The fund’s
8%
loss in
2014
was followed by an
8%
gain in
2015
that placed it in the top
3%
of the cate-
gory. More important, the fund’s
10
-year returns are
top-decile. It typically carries a big tech weighting
while investing only a small amount in cyclical busi-
nesses. Thus, its performance often tracks that of
tech. Joseph Monahan and Robert Mitchell look for
companies with huge growth potential and sound
strategies. The results have been strong but bumpy.
T. Rowe Price New Horizons
PRNHX
Henry Ellenbogen took over this fund in
2010
, and
he’s proved a worthy successor to Jack Laporte.
The fund’s
$16
billion asset base forces Ellenbogen
to own nearly
200
stocks; they skew toward the
borderline of mid-cap and small-cap, but he uses
that diversification to tone down volatility a bit.
He seeks out well-run companies with good business
models. Remarkably, the fund hasn’t lagged peers
or the Russell
2000
Growth Index in a single calendar
year since Ellenbogen took over. We rate this closed
gem Silver.
T. Rowe Price QM U.S. Small-Cap Growth
Equity
PRDSX
Here’s yet another tremendously successful, very
diversified T. Rowe Price small-cap fund, but this one
is open. The two funds stay out of each other’s way
because this is a quantitatively run fund with different
inputs. Sudhir Nanda employs a valuation model, an
earnings quality model, and a price momentum model.
As a result, this fund has a smaller median market
cap and a less growth-driven portfolio. We gave the
fund a Bronze rating in
2012
and raised it to Silver
in
2015
. Since we issued the Bronze rating, the fund
has gained a cumulative
74%
compared with
54%
for
the small-growth category.
Wasatch Core Growth
WGROX
and
Wasatch Small
Cap Growth
WAAEX
With overlapping managers and similar strategies,
these funds also have pretty similar profiles and
performance, but they’re not carbon copies. Jeff
Cardon stepped back from his spot as lead manager
on Wasatch Small Cap Growth in February, staying
on as comanager with J.B. Taylor moving up to lead.
Taylor also leads Wasatch Core Growth with Paul
Lambert as comanager. Wasatch Core Growth is a bit
less growthlike and has better five-year returns,
though the two are quite close when you go out to
10
- and
15
-year returns. Neither fund has returns as
great as those above, but they boast solid strategies,
experienced managers, and good analyst support.
Wasatch Small Cap Growth is closed to new investors,
but Wasatch Core Growth remains open.
K
Small-Growth Funds on a Roll
Tracking Morningstar Analyst Ratings
|
Russel Kinnel
What Are Morningstar
Analyst Ratings?
Our ratings are chosen for long-
term success. Analysts assess
a fund’s competitive advantages
by analyzing people, process,
parent, performance, and price.
They do rigorous analysis and
then submit their ratings to a
committee that vets their work
for thoroughness and consistency.