Pilgrim Baxter & Associates, Wayne, Pa., is celebrating the one-year anniversary of two highly successful mutual funds and savoring the early gains of a third fund run by the same portfolio manager.
The portfolio manager, Jim McCall, has chalked up gains from inception on April 5, 1995 through March 21 of 76.4% and 49.8%, respectively, for his PBHG Select and PBHG Large Cap Growth funds. In the same period the Standard & Poor's 500 Stock Index rose 31.44%.
The $200 million Select fund and $50 million Large-Cap fund were up 11.9% and 12.3% respectively for the year through March 21, far ahead of the 5.9% for the S&P 500. But those gains were upstaged by the 18.3% gain for the $27 million Core Growth fund launched Jan. 1. The funds have bested the returns of the firm's other retail offerings over the same period.
Select and Core Growth are all-capitalization funds, meaning they can invest in any size companies Mr. McCall chooses. Select is a non-diversified fund, which may hold no more than 30 names, while the other two may hold as many names as he wishes. Core Growth and Large Cap Growth each hold about 60 names. The large-cap fund is smaller cap than many peers, with a weighted average market capitalization of less than $7 billion. The fund's minimum market cap is $1 billion. Select and Core Growth have a weighted average market cap around $3.4 billion.
The funds all are managed using the firm's highly quantitative growth approach, which weeds out the top-ranked 100 names from a universe of 1,000 companies. The turnover is relatively high, 100% to 150% per year.
Mr. McCall's results are all the more surprising given that he scrambled to shed commodity-type semiconductor stocks and semiconductor equipment companies while technology was correcting in the fourth quarter.
His funds' peak technology weightings were in the high 40% range and now are in the high 30% range.
He likes specialty software and networking stocks such as McAfee Associates Inc. and Ascend Communications Inc., respectively.
His health care weighting has remained steady in the past year at 15% of his portfolios, followed by consumer stocks such as Boston Chicken Inc. and Tommy Hilfiger USA Inc. at 14%.
Is he worried about the market's volatility and earnings outlook? "We're not having any trouble finding new companies to invest in, he said. "That's not to say we don't get surprises sometimes. I've had some I've had to get out of pretty quick."
But so far most of the surprises have been positive. Among his top performers in Select: U.S. Robotics Corp., Thermo Cardiosystems Inc., Input/Output Inc. and The Money Store Inc.