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Delaware Select Growth: Growth Funds Looking Good



No matter what size company they've invested in---small, medium, or large---growth stock funds have made some solid positive strides in this year's market. So if you're starting to think "growth" and like aggressive management, here's a multi-cap growth fund that's team managed and worth watching.

Look back at the performance of the Delaware Select Growth Fund ( 800-523-4640), and you'll find that when the fund is hot, it ranks tops in performance. But when growth stocks are out of favor, as they have been over the past few years, shareholders pay the price.

So far this year, however, the price has been right as the Delaware Select Growth fund, managed by the Delaware Group since 1997, is doing its growth thing and beating the averages: Year-to-date performance, through August 1, shows the fund up over 23 percent while the average multi-cap-growth fund Lipper tracks was head 20 percent.

"The fund is definitely aggressive in nature, " says Lori Wachs, one of the fund's team portfolio managers who specializes in consumer stocks. " The past few years have been very challenging but if you look at recession recovery periods, growth tends to lead that cycle and I think that's where we seem to be right now."

Typically, the Delaware Select Growth Fund (DVEAX) keeps between 50 and 75 stocks in its portfolio. Currently, there are 67 names in it. Don't be too surprised if that number--or the names in it---change: Morningstar notes that the portfolio's turnover rate is 127 percent.

Here's more about the fund from Wachs:

Q: How many people are a part of the fund's team management?

A: There are six people who are the core of the team and we're divided along broadly defined sector lines. We also have junior analysts so all tolled there are about 10 people in the group.

Q: What areas do the various fund's team managers cover?

A:We're divided into four areas; health care, business and financial services; technology; and consumer. Right now business and financial services makes up 40 percent (of portfolio holdings), consumer is 24 percent, technology, 12 percent and health care 18 percent.

Consumer could go as high as 40 percent but we will never become a sector fund. Even when technology was at its peak, we kind of maxed out at 50 percent. And we kind of overstayed our welcome in technology over the past few years. But, given a more market-neutral environment, hopefully our stock selection will prevail.

Q: Tell me about a company that has served the fund well.

A: On the consumer side, Royal Caribbean has been really strong. Going back a few years, cruise companies had been doing well----they all started buying ships and buying options on taking additional ships. Then you got into a multi-year situation where there was some over-capacity that had to be worked out. On top of that, there were a few world crisis's where people didn't want to travel, September 11 and then, the war. So you ran into a period where the cruise operators had to get a little more aggressive on discounting to fill-up the ships.

Recent data shows that we are starting to see some booking trends and better pricing. As that happens, it starts to flow down and it looks like earnings should be staging a nice recovery.

Q: Have you held this stock for a while?

A: We've held it off and on through the years. But we took our big bet on the position before the war, when people started getting nervous. People always panic when you get into situations and world crisis's. And yeah, initially it does impact the leisure traveler but over time it comes back. So these situations have proven to be great buying opportunities.Q: What about a company that disappointed you?

A: Darden. It's a restaurant company. Their two main divisions are Red Lobster and Olive Garden. They had done a nice job of national advertising and driving people to their stores but just kind of run out of steam and out of new innovations within the past few months.

We held it for a few years and it had done pretty well. Then, they disappointed us a few months ago and we sold it.

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Dian Vujovich is a nationally syndicated mutual fund columnist, author of a number of books including Straight Talk About Mutual Funds (McGraw-Hill), and publisher of this web site.


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