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#9 in Mid-Cap Growth
U.S. News evaluated 220 Mid-Cap 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 8.98 percent over the past year, 13.47 percent over the past three years, 10.33 percent over the past five years, and 11.55 percent over the past decade.
|Trailing Returns||Updated 04.30.2013|
|Year to date||9.4%|
|3 Years (Annualized)||13.5%|
|5 Years (Annualized)||10.3%|
|10 Years (Annualized)||11.5%|
When Rick Aster launched the Meridian Growth Fund in 1984, a gallon of gas cost $1.10 and Sony had just introduced the first floppy disk. Twenty-seven years later, the world is radically different, but Aster's investment philosophy has stayed the same: He sticks to established firms with dominant market positions that have solid prospects for growth. Aster is patient, too. If a company meets all the fund's criteria but is too expensive, he'll sit back and wait for the right moment to pounce. "We can find companies that meet our criteria, but if you pay too much for them, it's not going to be a good investment," Aster says. "But if you monitor them over a period of time, you eventually get a shot at them. They'll come into your price range."
As of May 03, 2013, the fund has assets totaling almost $2.14 billion invested in 56 different holdings. Its portfolio consists primarily of U.S. equities, with smaller amounts of international holdings.
Aster primarily invests in growing mid-cap companies ($500 million to $5 billion), but isn't afraid to venture into small- and large-cap firms if the picks are backed up by strong fundamentals. As of the end of 2010, the fund held about 63 percent in of its portfolio in mid-cap firms.
Recently, Aster boosted the fund's holdings in industrial coatings manufacturer Valspar because of its global reach and expected growth in residential paint sales. Aster says that in an unsure economy, homeowners often defer to less expensive projects such as a new paint job instead of pricier renovations. Aster is also keeping a close eye on the tech industry, particularly software companies that may not be huge in size but lead the market. "These companies are growing in the U.S. and most of them have business outside of the U.S. They should do really well in emerging developing countries that need software products as they develop," he says. Aster says a company like Trimble Navigation, best known for its GPS technology, is a good example and should do well for the fund over the next five years, The fund has returned 8.98 percent over the past year and 13.47 percent over the past three years, outperforming both its benchmark (the Russell 2000 index) and others in its category.
Historically the fund has done relatively well in average and down markets. According to Aster, the slow but steady approach to investing means the fund might make smaller gains in big stock rallies, but it also tends to lose less when things look grim. The fund has returned 10.33 percent over the past five years and 11.55 percent over the past decade.
According to Morningstar, this fund takes a "kinder, gentler approach to growth investing." It seeks long-term growth by investing in bargain-priced small- and mid-cap firms with earnings increases of at least 15 percent a year. Fund manager Rick Aster favors the buy-and-hold approach--the portfolio's turnover rate is less than half its typical peer's--and he won't necessarily sell a pick that has migrated to the large-cap territory. "We may not be as aggressive in terms of small and medium [cap], we don't trade as much, we don't invest in the real high-multiple stocks, but we do relatively better in bad markets." Aster says the fund's strategy appeals to a lot of different investor types, but best suits those who have a long-term horizon, at least three to five years.
Role in Portfolio
Morningstar calls this fund a "core" investment.
The fund is managed by Richard F. Aster, Jr. and William Tao. Aster is president of Aster Management Company, which also manages the Meridian Equity Income Fund and the Meridian Value Fund. Previously, Aster was a securities analyst for Montgomery Securities. Aster has been with the fund since its inception in 1984. Tao joined in 2007.
Meridian Growth Fund has an expense ratio of 0.85 percent.
The fund has a compact portfolio of about 50 holdings and often concentrates investments in a few select sectors.