3 / 5 Stars
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4 / 5 Stars
#151 in Large Growth
U.S. News evaluated 468 Large Growth Funds. Our list highlights the top-rated funds for long-term investors based on the ratings of leading fund industry researchers.
The fund has returned 22.37 percent over the past year, 12.37 percent over the past three years, 18.77 percent over the past five years, and 8.05 percent over the past decade.
|Trailing Returns||Updated 01.31.2014|
|Year to date||-1.9%|
|3 Years (Annualized)||12.4%|
|5 Years (Annualized)||18.8%|
|10 Years (Annualized)||8.0%|
For investors who want growth-style returns without tacking on a ton of volitility, the Franklin Growth Fund's more patient, buy-and-hold approach to growth investing offers below-average turnover while maintaining solid long-term results.
As of February 05, 2014, the fund has assets totaling almost $9.65 billion invested in 170 different holdings. Its portfolio primarily consists of large-cap domestic stocks, with a smaller amount of foreign stocks.
The fund's staunch buy-and-hold strategy has helped it weather volatile market conditions over the past couple of years, and although the fund lost quite a bit in 2008's market collapse, it managed to beat both its benchmark and category by limiting its exposure to the financial sector. Comanager Serena Vinton says the fund's performance in 2008 is a good example of the fund's core mission. "We're a conservative growth fund," she says. "First and foremost, we protect on the downside."
In early 2010, management added a small position in Amazon after the company announced it would increase investment in its distribution centers. While other investors may have been spooked by Amazon's decision to reinvest some of its profits, Vinton says she looks for companies that continue to build one of the qualities she looks for when deciding whether to invest in a company. "Investing in the business is really a good thing, especially for future growth," she says. "We're investing in a business that can be much larger in the next 10 years." The fund has returned 22.37 percent over the past year and 12.37 percent over the past three years.
According to Morningstar, over the past 15 years, the fund's cumulative 207 percent gain has topped nearly 70 percent of its rivals. The Franklin Growth Fund's five- and 10-year trailing returns also puts it in the top 12 percent of the large growth category. The fund has returned 18.77 percent over the past five years and 8.05 percent over the past decade.
Although the fund is categorized by Morningstar as large growth, valuation plays a big role stock picking. "We're not in the camp of growth versus value," Vinton says. "Valuation is a component of our growth investment and we look to invest in companies when we believe the growth opportunity has not been reflected in [the current] stock price."
Identifying those opportunities takes patience, Vinton says, but management is in it for the long haul. "We take a very long-term time horizon. Our turnover rate is 5 percent, which actually equates to a 20-year holding period," she says. "Our belief is that if we have identified a true sustainable growth business with a good management team, that company is going to manage their way through the business cycle better than their peers and that over the course of time they should outperform."
The fund primarily invests in large, well-established "household names," and according to Morningstar, some stocks, including IBM and Johnson & Johnson, have been in the portfolio for more than a decade. Consequently, Franklin Growth has one of the lowest turnover rates in its category, which keeps trading commissions down and increases tax efficiency. Coupled with the fund's low 1 percent expense ratio, Morningstar says it's "one of the cheapest actively managed funds around."
Role in Portfolio
Morningstar calls this fund a "supporting player."
Comanager Jerry Palmieri, vice president of Franklin Investment Advisory Services, has been with the fund for more than 40 years, making him one of the longest-tenured fund managers around. Comanager Serena Vinton, vice president of Franklin Advisers, Inc., joined the fund after managing Franklin Capital Growth Fund for 12 years. That fund was absorbed into the Franklin Growth fund in 2008.
Franklin Growth Series Fund has an expense ratio of 0.91 percent.
As with all stock funds, market volatility can affect performance and returns.