The All Cap Growth style ranks sixth out of the twelve fund styles as detailed in my Style Rankings for ETFs and Mutual Funds  report. It gets my Neutral rating, which is based on aggregation of ratings of 2 ETFs and 453 mutual funds in the All Cap Growth style as of October 16, 2013. Prior reports on the best & worst ETFs and mutual funds in every sector and style are here .
Figure 1 ranks from best to worst the two all-cap growth ETFs and Figure 2 shows the five best and worst-rated all-cap growth mutual funds. Not all All Cap Growth style ETFs and mutual funds are created the same. The number of holdings varies widely (from 18 to 2019). This variation creates drastically different investment implications and, therefore, ratings. The best ETFs and mutual funds allocate more value to Attractive-or-better-rated stocks than the worst, which allocate too much value to Neutral-or-worse-rated stocks.
To identify the best  and avoid the worst  ETFs and mutual funds within the All Cap Growth style, investors need a predictive rating  based on (1) stocks ratings  of the holdings and (2) the all-in expenses  of each ETF and mutual fund. Investors need not rely on backward-looking ratings. My fund rating methodology is detailed here .
Investors seeking exposure to the All Cap Growth style should consider buying Advisers Investment Trust: Independent Franchise Partners US Equity Fund (IFPUX), the only ETF or mutual fund that earns an Attractive rating. Investors should not buy any other All Cap Growth ETFs or mutual funds because no others get an Attractive-or-better rating. If you must have exposure to this style, you should buy a basket of Attractive-or-better rated stocks and avoid paying undeserved fund fees. Active management has a long history  of not paying off. Here’s the list  of our top-rated stocks.
Get my ratings on all ETFs and mutual funds in this style by searching for All Cap Growth on my freemutual fund and ETF screener .
Figure 1: ETFs with the Best & Worst Ratings – Only Two ETFs
Sources: New Constructs, LLC and company filings
Figure 2: Mutual Funds with the Best & Worst Ratings – Top 5
Sources: New Constructs, LLC and company filings
Advisors Series Trust: Scharf Fund (LOGIX) is excluded from Figure 2 because its total net assets (TNA) are below $100 million and do not meet our liquidity minimums.
iShares Russell 3000 Growth ETF (IWZ) is my top-rated All Cap Growth ETF and Advisers Investment Trust: Independent Franchise Partners US Equity Fund (IFPUX) is my top-rated All Cap Growth mutual fund. IWZ earns my Neutral rating and IFPUX earns my Attractive rating.
First Trust Multi Cap Growth AlphaDEX Fund (FAD) is my worst-rated All Cap Growth ETF and John Hancock Funds II: Technical Opportunities Fund (JTCAX) is my worst-rated All Cap Growth mutual fund. FAD earns my Dangerous rating and JTCAX earns my Very Dangerous rating.
Figure 3 shows that 282 out of the 2148 stocks (over 18% of the market value) in All Cap Growth ETFs and mutual funds get an Attractive-or-better rating. However, no All Cap Growth ETFs and 1 out of 453 All Cap Growth mutual funds (less than 1% of total net assets) get an Attractive-or-better rating.
The takeaways are: mutual fund managers allocate too much capital to low-quality stocks and All Cap Growth ETFs hold poor quality stocks.
Figure 3: All Cap Growth Style Landscape For ETFs, Mutual Funds & Stocks
Investors need to tread carefully when considering All Cap Growth ETFs and mutual funds, as all but one fund earn a Neutral-or-worse rating. No ETFs and only one mutual fund in the All Cap Growth style allocate enough value to Attractive-or-better-rated stocks to earn an Attractive rating. Investors would be better off to focus on buying individual stocks instead.
Accenture PLC (ACN) is one of my favorite stocks held by All Cap Growth ETFs and mutual funds and earns my Very Attractive rating. Accenture has grown after tax-profits (NOPAT ) by 11% compounded annually over the past 11 years. The company is also currently earning a return on invested capital (ROIC ) of 64%, which puts it in the top quintile out of all companies that I cover. Despite strong growth for over a decade, ACN trades at ~$72/share, giving it a price-to-economic book value (PEBV ) of 1.03. This valuation implies that the market expects ACN’s profits to increase by only 3% over the remainder of ACN’s existence. Having grown NOPAT by 11% compounded annually for over a decade, these expectations seem too pessimistic. Strong growth, high ROIC and low expectations give ACN an attractive risk/reward profile.
Pharmacyclics Inc. (PCYC) is one of my least favorite stocks held by All Cap Growth ETFs and mutual funds and earns my Dangerous rating. Pharmacyclics has earned positive after-tax profits (NOPAT ) in only one of the past 15 years. The company earns a return on invested capital (ROIC ) of 7%, putting it in the fourth quintile of all companies that I cover. To justify PCYC’s current price of ~$124/share, the company would have to grow NOPAT by 30% compounded annually for the next 17 years. These are high expectations for a company struggling to generate any NOPAT. Investors should avoid PCYC.
Figures 4 and 5 show the rating landscape of all All Cap Growth ETFs and mutual funds.
My Style Rankings for ETFs and Mutual Funds  report ranks all styles and highlights those that offer the best investments.
Figure 4: Separating the Best ETFs From the Worst Funds
Figure 5: Separating the Best Mutual Funds From the Worst Funds
Review my full list  of ratings and rankings along with reports on the two ETFs and 453 mutual funds in the All Cap Growth style.
Jared Melnyk contributed to this report.
Disclosure: David Trainer is long ACN. David Trainer and Jared Melnyk receive no compensation to write about any specific stock, sector, style or theme.