S&P five-star ranked Mairs & Power Growth Fund has, over the past year, consistently been top-ranked within S&P's coverage universe, and garners positive performance analytics, risk considerations, and cost factors scores.
MPGFX was opened to investors in 1958 and is one of only 15 out of 1,673 multi-cap funds in the S&P universe in existence since before John F. Kennedy was elected President. This nearly $1.9 billion fund is open to new investors with a minimum initial investment of $2,500. Its stated objective is to provide above-average long-term appreciation through investment in a diversified portfolio of common stocks of U.S.-based companies.
To select equities for the portfolio, managers William Frels and Mark Henneman begin by monitoring about 300 companies, which are typically headquartered in the upper-mid western section of the United States. The mangers believe that by concentrating their efforts in companies that are located close to their St. Paul, Minnesota location, they are able to be more familiar with the firms. They cull that list of 300 down to 100, which they more closely monitor. Companies that make this group have, in management's opinion, strong balance sheets, distinctive competitive strengths, and above-average profitability. They further trim those 100 to come up with 15 companies that comprise their buy list. For one of those 15 to make it into the portfolio of 46 stocks, management looks for equities that have attractive valuations or companies that are exhibiting accelerating earnings growth. The team does not put a premium on adding names to the portfolio; they may add just one or two names a year. The fund's buy-and-hold philosophy can been seen in is portfolio turnover rate, which is typically under 5%. Based on the latest data available to S&P, with a 3% turnover rate,
MPGFX incurs significantly lower cost factors than the 84% rate for its peers.
S&P has a favorable view of the fund's performance relative to its multi-cap core funds peers over the trailing one and three-year periods ended September 2010 (see table). Over longer spans,
MPGFX has also been a top performer. For example, the fund outpaced its peers by nearly 500 basis points over the 10-year period on an annualized average basis.
With the top 10 positions comprising 44% of assets, the portfolio is a relatively concentrated one. Within that group, there are a number of stocks that are currently ranked buy (4-STARS) by S&P Equity Analysts (STARS is an independent and qualitative approach to stock selection employed by S&P's global research team.), including Ecolab and 3M.
In general, S&P views the fund's portfolio as high quality. Eight of the top-10 holdings have a Quality Rank of A- or above. S&P's Quality Ranking is a metric that assesses dividend and earnings growth and consistency. Further, the portfolio is generally invested in stocks that have high investment-grade S&P credit ratings, which are developed independently from S&P Equity Research.
As of August 2010, the portfolio had a 34% exposure to the industrials sector. Within that group is 3M, which management believes has made a commitment to research and development and is now beginning to see the benefit. Another large sector is health care, with about 18% of assets. Fund management likes the sector in general, citing its favorable demographic trends. In particular, they favor medical device makers including Medtronic and St. Jude Medical.
Also contributing to the five-star ranking of MPGFX is its lower-than-peers costs. The fund's expense ratio of 0.7% is less than half of the multi-cap core fund group average of 1.5%, and it has no sales load.
Overall, S&P Equity Research views Mairs & Power Growth Fund as a top selection within the domestic equity category, given its strong performance, relatively modest risk level, and low costs.
As with all investments, S&P believes that investors should look to make selections that are suitable for their objectives and risk profiles. To learn more about the S&P fund ranking methodology,
click here.
Data through September 30, 2010. *Total returns include reinvested dividends and capital gains, all annualized; calculations do not reflect the effect of sales charges. Source: S&P Mutual Fund Reports. S&P Mutual Fund Rankings reflect an analytical mixture of past performance metrics with an assessment of a fund's holdings and cost factors. An S&P five-star fund is ranked in the top 10% of its Category. The S&P fund ranking is accurate as of October 15, 2010, but is subject to change at any time. For important disclosures, please go to www.standardandpoors.com, and click on “Regulatory Affairs.”
