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The Intelligent Investor

The Danger Zone Pick: 11/12/12

Check out my latest Danger Zone interview with Chuck Jaffe of MarketWatch.com.

JPMorgan Trust II: JPMorgan Large Cap Growth Fund (OLGAX) is in the Danger Zone this week.

Per the figure below, 46% of the stocks in the large cap growth category get my Attractive or better ratings. Only 17% of the stocks are dangerous or worse. Here are more details on the Best & Worst Funds in in the large cap growth category.

This means that mutual fund managers have lots of great stocks to choose from when managing their portfolios. There are many more good stocks than bad stocks in the large cap growth category. For a mutual fund to get a Dangerous or worse rating in this category, the manager must heavily weight the fund’s portfolio to the few bad stocks in the category.

And if that happens, then one must ask – why am I paying such high fees for a manager to put me in bad stocks, especially when there are so many other good stocks out there?

JPMorgan Trust II: JPMorgan Large Cap Growth Fund (OLGAX) is one of very few funds and a large portion of the 1% of Dangerous-rated AUM. And the fund’s Total Annual Costs is 3.31% versus 0.22% for its benchmark: iShares Russell 1000 Growth (IWF). Those are some really high fees for portfolio management that does not add any value. More detail in free report on OLGAX.

Figure 1: Large-cap Growth Style Landscape For ETFs, Mutual Funds & Stocks

Sources: New Constructs, LLC and company filings

Only 4% of the mutual funds in the large cap growth category get a Dangerous Rating
Only 1% of the assets in the large cap growth category are in the Dangerous-rated mutual funds.

And one of OLGAX’s top 5 holdings is Apple (AAPL), a stock I like and gets my Very Attractive Rating. Apple is in most ETFs and mutual funds. The problems with OLGAX is that too much of the rest of the fund’s portfolio is in poor stocks.

Disclosure: I own AAPL. I receive no compensation to write about any specific stock, sector, style or theme.

TAGS: Mutual Funds
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