Walter Frank, Moneyletter newsletter - The large-cap revival certainly looks solid as the large-cap averages hit new highs

Walter Frank, editor of the Moneyletter newsletter, says large-cap revival certainly looks solid as the large-cap averages hit new highs. Read this featured experts commentary regarding such stocks and learn his outlook in European stocks. Afterward read Frank's profile of the Needham Growth Fund. Commentary As the quarter developed, investors here and abroad became less and less concerned about the Fed as signs of a slowing U.S. economy became more apparent with every new housing number. It was then that investors turned to a long neglected lower risk segment of the market, large-cap stocks, particularly value. Large-cap portfolio managers, such as Larry Puglia of T. Rowe Price Blue Chip Growth, had been pounding the table for months pointing out the relative cheapness of large-cap stocks (relative to small caps, that is). But investors had turned a deaf ear. Now that risk-avoidance was Priority One, they listened. There was one other trend which surfaced that was not exactly a follow-on from May 10. In the overseas markets, European stocks came to life. The developed European markets by their very nature are considered less risky. More important, the Western European economies, led by Germany, are showing solid improvement. Stagnation has turned to growth. You can see what has been happening by looking at the turnover in Walter Frank and his team's portfolios. In their MONEYLETTER portfolios they now hold Morningstar Large Value and Powershares Dynamic Large Cap Value. Gone are Bridgeway Small Cap Value, Janus Orion, and Forward International Small Companies. Large Cap Value is sprinkled through the Fidelity and Vanguard portfolios as well. The question now is will these very short-term trends endure? Looking at the very recent behavior of the markets, Frank and his team do not find one blanket answer. They have recently written (MONEYLETTER, September 22 ) that we believe the commodity selling was a shorter-term speculative spasm. And the commodity markets have just recaptured some lost ground. Liquidation has apparently ended. The large-cap revival certainly looks solid as the large-cap averages hit new highs, and the argument for large caps is convincing. The difficulty is large caps just do not get the blood moving. Frank and his team have argued that there is a lower interest rate ceiling than before on the U.S. market, and that essentially applies to large-caps. Finally, Frank's team sees the tilt to Europe as longer lasting. Of course, they are not talking about the explosive growth of China or India here. Nor has Europe just been discovered. But is appears to them that growth is taking hold, and as it does, undiscovered opportunities in neglected stocks will surely arise. Fund Profile Needham Growth Fund (NEEGX) truly marches to its own drummer. Long equity positions, short equity positions, small-cap, mid-cap, large-cap, substantial cash—Needham has it all. It also has one simple goal: to garner positive after-tax returns. Vince Gallagher and Jim Kloppenburg took the helm of this fund in April 2003 from Peter Trapp, who guided the fund to well-above average returns in most years. And when, in 2004, the new management team landed the fund in the bottom quartile of the small-cap growth category, the doubters were many. Yet, the naysayers have since been silenced. In 2005, a 14.5% total return put Needham Growth above 96% of its peers. And for 2006 through October 13, a 14.7% return outpaces 92% of its Morningstar peers. This article highlights the commentary of Walter S. Frank for the Zacks.com audience. Walter S. Frank provides insightful analysis, market commentary, and favorite recommendations on a timely basis in "MONEYLETTER" newsletter. Try it free for 30 days and see if you can improve your investment performance. Learn more about "MONEYLETTER" and 30-Day Free Trial. And get immediate access to current issues and special reports. Click here now. Here's How You Can Profit from the Pros Find out what other leading experts are saying about the market. And what stocks they are recommending. For free. Just sign up for our free email newsletter, Profit from the Pros, where we'll give you the commentary, advice, and insight from those rare few experts who consistently beat the market year in, year out. | Blog Home| VitalStocks Home