Vanguard Primecap: Growth With an Eye to Value

Editor's note: This is part of a continuing series of articles looking at the 20 biggest no-load stock funds.

There are growth funds that soar toward the sun with their hot, momentum-driven stock holdings, and then plunge, Icarus-like, when the stocks fall out of favor. Then there are a handful of large-company growth funds, such as Vanguard Primecap, that identify growth businesses with strong niches and high barriers to business entry and ride these winners for a long time.

Primecap Management, a low-profile shop based in Pasadena, Cal., has run Vanguard Primecap since 1984. A. Joseph Brennan, a principal in Vanguard's portfolio review group, describes the Primecap style as "valuation-conscious growth investing." If you're lucky enough to be invested in this now-closed fund, you've profited from Primecap's long-term, patient investing method (portfolio turnover during the last year for which figures are available was a rock-bottom 12%). Over the past decade, Primecap has returned an annualized 13%, more than double the return for the large-capitalization growth fund sector.

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Primecap's five managers think about stocks independently, then compare notes. The fund's relatively high concentration reflects the frequency with which the managers reach the same conclusion on companies. Stocks that Primecap has held for more than a decade include Federal Express, Medtronic and Adobe Systems. New positions include Swiss pharma giants Novartis and Roche.

If you're invested in this winner, BUY more. If not, consider Vanguard Primecap Core (VPCCX), which has more of a value bent and is still open. (Vanguard Primecap Core is also a member of the Kiplinger 25.)

FUND FACTS

Vanguard Primecap (VPMCX)Assets: $22.4 billion

Manager (year started): Team (1984)

Returns (vs. S&P 500)*

2006: 12.3% (15.8%)

Three years annualized: 13.0% (10.4%)

Five years annualized: 8.4% (6.2%)

Ten years annualized: 12.7% (8.4%)

Expense ratio: 0.46%

Portfolio turnover: 12%

Initial minimum investment: $25,000

Phone: 800-662-2739

Web site: www.vanguard.com

*Returns through Dec. 31.

Fund Fact sources: Standard & Poor's, Morningstar

View updated data for this fund and compare the performance of the 20 biggest no-load stock funds.

Go to A Close Look at the 20 Biggest No-Load Stock Funds.