Past performance may be no guarantee of future results, but as any good detective knows, there’s no such thing as a coincidence. In the same way, there’s something to be said for a mutual fund with a good track record, especially over the past decade. The past 10 years included two bull markets, two bear markets, high inflation and a record rise in interest rates — oh, and a global pandemic, too.
For that reason, we set out to find the top-performing actively managed funds over the past 10 years in each of the nine stock fund style categories defined by Morningstar. The financial data firm divides funds into those focused on growth, value or a blend of the two, invested in large-, small- or midsize-company stocks.
Our final list includes funds that employ a variety of strategies, which we highlight below. We didn’t originally intend to exclude index funds, but frankly, few rose to the top — except in the large-company growth category (which includes funds that track the Nasdaq 100 benchmark and so happen to be stuffed with the tech behemoths that have dominated the market lately). Given the slim showing, we decided to focus on actively managed U.S. stock fund winners.
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These aren’t the top performers in every category. We only considered funds that are open to new investors, require reasonable minimum initial investments and have had at least one manager in place for the entire decade. That eliminated some standout funds with newer managers, including Fidelity OTC, T. Rowe Price U.S. Equity Research and Parnassus Value Equity (formerly known as Parnassus Endeavor).
Most of the funds have above-average expense ratios, and a few are load funds (but all are available with no transaction fee or sales charge from major brokerage platforms). It’s important to note that a place on this list does not equal a Kiplinger recommendation.
Still, funds that owned the decade deserve looking into. Read on to learn more about the winners, listed in alphabetical order within their fund categories. All data and returns are through May 31, unless otherwise noted.
Large-company stock funds
Fidelity Blue Chip Growth (FBGRX). Since Sonu Kalra took over management duties at Fidelity Blue Chip Growth in mid 2009, he has steered the fund to an 18.8% annualized gain, handily beating the S&P 500 index and peer large-company growth funds. His fund’s 10-year annualized return, a whopping 17.5%, topped all the other portfolios highlighted in this story, too. By comparison, the S&P 500 gained 12.7% annualized. The fund charges a low, 0.48% annual expense ratio.
Kalra aims to invest in companies that can sustain healthy growth rates for long periods of time. He likes to get in early and hold. Most of the fund’s 260-stock portfolio is made up of companies that he says are beneficiaries of long-term growth themes, such as e-commerce, cloud computing, generative artificial intelligence, and health and wellness. Most of the fund’s top holdings fall in this secular-growth category, including Amazon.com (AMZN), Alphabet (GOOG) and Apple (AAPL), and they have been in the portfolio for well over a decade. “That’s a sign we’re doing our job well,” Kalra says.
Much of rest of the portfolio is devoted to companies with shares that might be flagging but are poised to benefit from a cyclically driven growth phase (energy stocks during COVID, say, or housing stocks when that industry is in a slump). A smaller group, which Kalra calls “self-help stories,” are businesses with a new manager or product (think of a retailer, for instance, with a growth driver that’s underappreciated).
But the fund’s stake in private companies sets Blue Chip Growth apart. They make up just 3% of the fund’s assets, but, Kalra says, “the private placements allow me to build a relationship with a company years before it goes public. So by the time it does, I have conviction on whether to buy it or not.” He owned a small stake in Facebook, now Meta Platforms (META), before it went public in 2012. After its IPO, the stock lost half its value, but Kalra bought more shares because he had confidence the company would do well, especially after it enhanced its smartphone app to boost advertising revenues. Meta stock, now a top-10 holding, has increased an average of 23% per year since its IPO (a 12-fold climb from its opening price).
Natixis U.S. Equity Opportunities (NEFSX). Two subadvisers divide the assets in this large-company stock fund. Roughly half of the fund is run by the folks who manage the vaunted Oakmark value fund, namely Bill Nygren, Michael Nicolas, Robert Bierig and Michael Mangan at Harris Associates. A growth-tilting stock-picking team from Loomis Sayles, led by Aziz Hamzaogullari, manages the other half of the assets. The end result is a large-blend fund.
Over the past 10 years, the fund’s 13.1% annualized return outpaced the S&P 500. But in truth, the fund’s performance has been spotty. U.S. Opportunities has lagged the benchmark in six of the past 10 calendar years (2022, 2021, slightly in 2019, 2018, 2016 and 2014). Average returns with high risk are characteristic of the past three years, according to Morningstar. It’s reason to be a bit wary of this fund. Its annual expense ratio, 1.09%, ranks above average for its category.
Value guru Nygren and his team aim to purchase shares in large-capitalization companies that trade at least 30% below the team’s estimate of the companies’ intrinsic value, or true business value. But growth can be a value in their book. Meta Platforms (META) and Alphabet (GOOG), for instance, were among Nygren’s holdings at certain points over the past decade. “The opposite of cheap isn’t growth,” Nygren is famous for saying; rather, “it’s expensive.” The track record of Nygren’s Oakmark fund, which is run in a manner similar to the way he runs his portion of this Natixis fund, ranks among the top 3% or better of its peer group (large-company value funds) over the past five, 10 and 15 years.
Meanwhile, Loomis Sayles’s Hamzaogullari and his team run their portion of U.S. Equity Opportunities using a seven-step process that targets companies that have high barriers to entry or a competitive edge in their industry, throw off plenty of cash, and have good executives at the helm who have the long term in mind (not a quarter-to-quarter mind-set). Also, price matters: Hamzaogullari is only interested in purchasing shares if the company’s stock trades below his estimate of the company’s intrinsic value. Hamzaogullari is also behind Loomis Sayles Growth fund, which ranks in the top quartile of large-company growth funds over the past three and 10 years. Nvidia has been a top-performing pick for the Loomis half of U.S. Equity Opportunities over the past year.
Smead Value (SVFAX). Value stocks have been out of fashion for most of the decade, which makes Smead Value’s 12.0% annualized 10-year return notable. That doesn’t outpace the S&P 500, but the large-company value fund ranks among the top 1% of its peers, despite a high annual expense ratio of 1.24% (above average for its category).
Its secret? “We’re probably dead wrong 30% of the time, so we spend a lot more time trying to figure out where we were wrong than where we were right,” says longtime manager Bill Smead, who has an impressive memory for historical market data. He runs the fund with his son, Cole.
Over the years, they’ve learned from their mistakes. One thing they’ve found is that it pays to hold on to winners. Besides the low cost of an index fund, “the S&P 500 has an advantage over active stock pickers: low turnover,” says Smead. S&P 500-trackers “hold their winners to a fault.” So he does, too. Smead first bought stock in biotech firm Amgen (AMGN) in 2011, for instance, when it traded at $52 a share and a price-earnings ratio of 11. “Today, it’s a $300 stock and has paid out massive dividends,” he says. The fund’s typical holding period is about seven years.
Companies in the portfolio must fulfill an economic need, have a strong competitive advantage in their industry and a long history of profitability, generate high levels of free cash flow (money left over after expenses to operate and invest in the business), and trade at a low price relative to their intrinsic value. Top holdings include American Express (AXP) (which Smead describes as “the Mother Teresa of financial firms”), Occidental Petroleum (OXY) and Merck (MRK).
The portfolio’s 28 stocks trade at an average P/E of 14 and boast average cash-flow growth of nearly 12%. Compare that with the S&P 500’s average P/E of 21 and cash-flow growth of 9%. “Our companies are superior to the S&P 500, and you’re getting them at a bargain to the S&P 500,” he says. With his portfolio holding none of the enormous companies that currently dominate the market, Smead calls his fund the “antidote” to the problem of mega-cap concentration in the S&P 500.
Mid-size company stock funds
Baron Focused Growth (BFGFX). “Our favorite holding period is forever,” says David Baron, who runs the Focused Growth mid-cap growth fund with his father, Ron Baron. They like to invest in growing businesses that they believe can double in market value within five to seven years. The Barons typically keep the portfolio to a trim 20 to 30 stocks, getting in early when companies are small to midsize—the younger Baron says this is “a SMID fund”—and holding on as long as their investment thesis still stands. Stocks in small and midsize firms make up three-fourths of the fund; large stocks account for 11%.
Focused Growth currently holds 34 stocks. That’s higher than usual, says David, because the fund had 10% of assets in cash about 18 months ago that the Barons have since put to work in a stack of new opportunities, including sneaker company On Holding (ONON) and Spotify Technologies (SPOT).
The fund’s 10-year annualized return of 15.3% ranks among the top 2% of mid-cap growth funds—beating its benchmark, the Russell 2500 Growth index, which gained 9.4% annualized, as well as the S&P 500. But from the start of 2014 through 2016, Focused Growth lagged its peers in a big way, thanks in part to Tesla (TSLA), which was teetering toward bankruptcy then. “That was a tough time in the market,” says David. “We’re okay not making money in stocks for two to three years. As long as we can get the double in four to five years, we’ll continue to invest in the stocks if they’re trading at attractive prices.” Tesla is the top holding in the fund today. “Musk’s balance sheet has no debt, and he’s sitting on $28 billion in cash—and that’s after spending $10 billion this year on capital expenditures,” David says.
In other words, the Barons are willing to be patient with Tesla. Other times, however, they’re inclined to sell. The pair owned Penn National Gaming (now Penn Entertainment (PENN)) in the early 2020s, but a couple of acquisitions left the balance sheet with too much debt, David says, and the firm was “spending in the wrong places.” They unloaded their stake in 2023.
Baron Focused Growth has outpaced its peers and its benchmark in six of the past 10 years. Volatility is high, though aggressive investors may find the rewards worth the risk. The fund’s expense ratio is 1.32%, above average for its peer group.
Diamond Hill Select (DHTAX). Small- and midsize-company stocks dominate the portfolio of Diamond Hill Select, but the fund can invest in companies of any size. Its benchmark is the Russell 3000, which tracks about 96% of the investable U.S. stock market (the S&P 500 covers 80%).
Austin Hawley and Rick Snowdon have run the fund since 2013. They call themselves “intrinsic value investors,” which means they like a good bargain, but they also consider a firm’s growth prospects, too. (Morningstar currently classifies the fund as mid-cap value.) When big tech names sold off in early 2022, Hawley and Snowdon picked up stakes in Microsoft (MSFT), Alphabet (GOOG) and Amazon.com (AMZN). Those moves helped the fund deliver a 30.2% gain in 2023, beating the Russell 3000 and the S&P 500. The managers sold their stakes in Alphabet and Microsoft at different points in 2023 as those share prices moved up significantly, but they still own Amazon.
The fund is trim (hence the “Select” part of its name), holding just 28 stocks at last report. That may explain why it has been more volatile than other midsize-company funds over the past 10 years, though its returns have made up for the added risk. Over the past decade, its annualized return of 10.8% didn’t beat the broad market, but it outpaced 97% of its peer group. For context, the Russell 3000 gained 12.1% annualized over the same period. And the fund’s five-year annualized return even surpassed the S&P 500. Its greatest hits over the past decade include mortgage-servicing company Mr. Cooper (COOP) (formerly Nationstar Mortgage Holdings) and Wesco International (WCC), a leader in electrical, communications and utility distribution.
Investors should note, however, that the fund’s Morningstar style classification tends to shift. Select has been in Morningstar’s mid-cap value category since the start of 2021, but between 2015 and 2020 it was considered a large-cap blend fund, and in 2014 it was called a large-cap value fund. “I don’t think there’s a good peer group for the fund, and that’s a challenge for a strategy like ours,” says Hawley, who adds: “We believe it’s a benefit to have an all-cap universe. It allows us to capitalize where we see the best opportunities.” The fund charges an above-average fee of 1.16%.
FAM Dividend Focus Fund (FAMEX). Paul Hogan, the founder of FAM Dividend Focus, likes to take the long view: “We really think in terms of decades when we pick businesses for the fund.” One of the mid-cap blend fund’s original holdings from its launch in 1996 is still in the portfolio, and a number of holdings go back to the early 2000s.
As the fund’s name implies, dividends are key. Every company in the fund pays one. But a high yield isn’t the focus. “That dividend has to be growing,” says Hogan, who took on a comanager, Will Preston, in 2020. “We want to see a history of dividend growth and that it will continue to grow at a good clip.”
If a company cuts or stops paying its dividend, that’s an “automatic disqualifier,” says Preston. “We’re not going to own that stock anymore.” But if the payout remains steady for a year or so, that’s okay. For the 12-month period ending April 25, 23 of the fund’s 26 stocks increased their dividend, by an average of 9%.
Of course, other measures matter, too, when Hogan and Preston pick stocks. They’re looking for company access (they visit every company they own at least once a year), ethical managers, and a high and increasing rate of return on the capital invested in the business (a profitability measure known as return on invested capital). Among the many other factors the managers consider when they assess a company’s quality are whether the chief executive knows most of the employees by name and whether the executive team is willing to take a pay cut to keep the factory going during a global pandemic.
Companies have to be midsize at the time of purchase, as defined by the Russell Midcap index (its current average market value is more than $26 billion), but Hogan and Preston let their winners run. “The fund’s best performers grow to be the largest holdings in the fund, and that’s the largest source of our outperformance versus peers and the index,” says Hogan. The average market value of the fund’s top holdings, for example, is $48 billion. Trane Technologies (TT), the HVAC system company, has a $74 billion market value and has been in the fund since 2015; medical-equipment maker Stryker (SYK), with a $126 billion market value, dates back to 2009.
Resisting the urge to trim winning stocks “leads to low fund turnover and low taxes,” says Hogan. It helps keep a lid on risk, too. Over the past three, five and 10 years, FAM Dividend Focus has delivered well above-average returns with below-average volatility. “You’re taught in business school that if you want high returns you have to take on high risk, but that’s not the case with this fund at all,” says Hogan.
The fund’s 11.6% annualized return over the past decade ranks among the top 5% of all midsize-company blend funds. That’s net of expenses, which are 1.22% per year—above average for its peers. And its 10-year record beats the 9.5% return in the Russell Midcap index, too. Even more impressive, the fund has outpaced its peer group in nine of the past 10 years. “These results are repeatable for us because we’re not chasing an economy reopening story, or interest-rate cuts or interest rates going up,” says Hogan. “We don’t have to do that. We simply own quality companies where customers have to or want to do business with.”
Small-company stock funds
Hennessy Cornerstone Mid Cap 30 (HFMDX). This fund has the term “Mid Cap” in its name, but it skews small, with an average market value for stocks in the fund of $5.4 billion. The managers of this small-cap value fund use four simple steps to choose 30 stocks.
The aim is to buy undervalued companies with proven sales and earnings growth. The process starts with company size—only companies between $1 billion to $10 billion in market value are considered—and a price-to-sales ratio of less than 1.5. Next, annual earnings must be higher than the previous year (the companies don’t have to be profitable, but earnings must be trending in a positive way), and shares must have posted a positive gain in price over the past three and six months. And that’s basically it.
The four-step process whittles a list of about 5,000 down to roughly 100, which are then ranked by 12-month returns. The top 30 become the portfolio. The fund’s assets are equally divided into the 30 names, and then the managers leave the portfolio alone for a year, rebalancing typically in the fall. “We try to only have long-term gains whenever possible,” says Ryan Kelley, who manages the fund with Neil Hennessy and Joshua Wein.
It’s a simple process that has not changed over the fund’s 21-year history. The results? A 12.2% annualized gain since inception in 2003, which beats the small-cap benchmark, the Russell 2000, as well as the S&P 500. Over the past decade, the fund boasts a 12.2% annualized return, shy of the S&P 500’s gain but ahead of the 7.7% average annual gain in the Russell 2000. “The reason we like this process is that it takes the emotion out of investing,” says Kelley. The fund’s expense ratio, 1.34%, is above average for its peer group.
Needham Aggressive Growth (NEAGX). Small-company stocks are the focus at Needham Funds. “It’s all we do. We live and breathe these companies,” says John Barr, longtime manager of small-company growth fund Needham Aggressive Growth.
Barr focuses on under-the-radar companies that are investing in a new product or service that’s poised to boost the firm’s results. To provide stability, he says, the company’s new endeavor must be funded by a legacy or established business that’s profitable or generating cash—not by debt.
Over the past decade, that process has delivered chart-topping returns to shareholders. The fund’s 10-year annualized return, 15.3%, walloped the Russell 2000 small-company index, as well as the S&P 500.
The ride has been bumpy, but that’s a given—small-cap stocks tend to be more volatile than their larger brethren. It’s worth noting, however, that Needham Aggressive Growth has been a tad less volatile than the typical small growth fund, as well as far more rewarding.
Taking the long view and holding on to winners past the small-cap stage is part of Barr’s game. “The challenge is just to hold on and not sell,” he says. He’s drawn to firms run by founders, families or long-tenured executives “because they think long term,” he says. The fund owns shares in nearly 80 companies and typically holds for eight to 10 years. Its top holding, Super Micro Computer (SMCI), has been in the fund since 2009 and is a “100-bagger for us,” Barr says.
He likes to get in early, buying stakes in promising, mostly micro-cap-size companies he calls “hidden compounders.” If successful, they shift into what Barr calls the “transition compounder” stage, when the company’s new venture starts to impact results. Eventually, good companies grow into “quality compounders,” or leaders in established—but growing—markets. Half of the hidden compounders make it to the transition stage, and then only about 20% become quality compounders.
Among many memorable winners over the past decade are two semiconductor industry players, Nova (NVMI) and Entegris (ENTG), both longtime holdings that are still in the portfolio. Each has climbed more than 11-fold in price over the past decade. Barr remembers some losers, too, such as Dirtt Environmental Solutions (DRT), a Canadian maker of premanufactured walls and systems for the construction market. He bought shares in 2017 then watched the stock tank, selling in 2020 at roughly a 60% loss.
Small-cap stocks have lagged the broad market over the past decade, but “there are small caps out there that have done well and continue to do well,” says Barr, adding that he’s found success in part by focusing on firms with good balance sheets that throw off cash, operating in steady businesses that are less vulnerable to the whims of the consumer. The fund’s annual expense ratio, 1.82%, is well above average for its peer group.
Thrivent Small Cap Stock (TSCSX). To avoid value traps, or stocks that are cheap because they deserve to be, the managers at Thrivent Small Cap Stock give prospective companies what fund comanager Jim Tinucci calls the “APGAR test,” the name for the health screen that newborn babies receive just after birth. But instead of gauging skin color, muscle reflexes and heart rate, Thrivent’s small-company test focuses on industry and company growth, competitive advantage, size of the total market that the company attempts to address, and whether key profitability yardsticks measure up.
Firms that fail the test don’t get a closer look. “Value traps are companies in industries that don’t grow and are already fully penetrated,” says Tinucci, who manages the fund with Matthew Finn and Katelyn Young. “So, in our first look, we’ll know if this is a business we want to do further work on or not.” When they invest in a stock, its market value must fall at or below that of the largest firm in either the Russell 2000 ($49 billion in late April) or the S&P SmallCap 600 index ($8 billion).
Something about the manager’s APGAR test for small companies is working, because this small-cap blend fund has outgunned the Russell 2000 over the past decade. Its 10-year annualized gain of 11.4% ranks among the top 2% of its peer group. By contrast, the Russell 2000 has a 7.7% annualized return. Thrivent Small Cap Stock charges a below-average 0.81% expense ratio, according to Morningstar. The fund typically holds between 80 and 120 stocks. Its longest-held stock, Curtiss-Wright (CW), makes equipment for the aircraft and naval defense industries. Since early 2014, when the fund first purchased it, the stock has more than quadrupled in price
Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
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