Unlike 2009, MidCap growth stocks got off to a good start in the first quarter of 2010. This marks their fourth consecutive quarter of positive performance. The MidCap Growth Fund returned 6.21% versus 7.67% for the Russell Midcap Growth Index.
For the quarter, consumer services and non-durables were the strongest, returning nearly 13%. The Fund had 13.5% exposure to this group compared to the Index at 13.9%. Stock selection in this group was beneficial to the Fund’s performance in the quarter. Holdings such as Smithfield Foods Inc. (1.05%) and Chipotle Mexican Grill Inc. (1.60%) increased 36% and 28%, respectively.
While investors rewarded consumer-oriented names in the first quarter, they were less supportive of utilities. The Fund’s 0.7% underweight to utilities was beneficial as the sector declined 6.23%. Also underperforming the Index were energy-related stocks. The Fund was underweight this group but stock selection had a negative impact. The poorest performers were Dresser-Rand Group Inc. (1.32%) and CONSOL Energy Inc. (0.84%), down 4% and 19%, respectively.
Surprisingly, heath care was the second best performing sector, up 11.68%, despite uncertainty regarding health care legislation. The Fund experienced poor stock selection in this sector, returning 7.66%. Among the laggards were DENTSPLY International Inc. (1.00%), Cerner Corp. (1.63%), and Laboratory Corp. (1.54%), returning a decline of 1% to an increase of 1%.
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