Large-Cap US Value Funds Enjoy Market Hey Day

May 20, 2003 ( - Domestic large-cap value funds are becoming the cat's meow as a still-developing broad market recovery pushed up industrial giants like General Electric Co., Citigroup Inc., and Xerox Corp.

While these funds – one of the most popular types of mutual funds among US investors – are up an average 14.9% over the past three months, that still trails the average diversified US stock fund’s 16.2%-increase during the same period, according to a Reuters report.   Large-company value managers say they see still more growth potential as corporate earnings are expected to improve and company cost-cutting measures take hold.

The best performer for the three months, based on funds with at least $100 million in assets, was the Neuberger Guardian fund, which exploded by   21.5%, according to Lipper data.

The biggest fund in the category is the $48.2-billion American Funds Washington Mutual fund, according to Lipper. The fund was up 14.3% over the past three months.   Another big fund is the $11-billion Lord Abbett Affiliated fund which gained 16.5% in the three-month span, according to Lipper.

Robert Morris, director of equity investments for Lord Abbett, said the Affiliated Fund benefited from gains in companies such as Apple Computer Inc. which is up about 26.3% year-to-date through Monday and Xerox, up 29.2%.   “We’ve seen nice bounces in some selected technology stocks,” he told Reuters. “We are trying to find companies within the technology sectors that look live they’ve been overdone.”

Fund managers say that, after a rough 2002, when the average large-cap value fund fell about 20%, they are seeing a rebound in many stocks that had been hit hard.

Large-cap value funds have about $181.9 billion in combined assets, making them one of the largest types of US stock funds. Their price-conscious managers look for stocks that are considered cheap based on price-to-earnings ratios or other measures, or whose prices have been knocked down based on worries about restructuring or other issues.