Looking for a winning growth stock? Zero in on companies that invest in themselves. That's the market-beating template of best mutual fund Voya Large-Cap Growth (IGOWX).
When identifying stocks to add to the roughly 50-stock fund, co-managers Kristy Finnegan and Leigh Todd keep it simple: "We're really looking for companies that are investing to drive growth," said Leigh. "We believe those types of companies will consistently outperform."
What traits do they look for in a winning growth stock? Companies investing in research and development, better known as R&D. Firms that invest in their brand are also attractive. And they look for those that efficiently allocate capital expenditure dollars to drive growth.
Best Mutual Fund Finds Future Profits
Looking in the rearview mirror, such as scanning the past 12 months' sales growth or even looking just one year ahead, doesn't tell the story they're looking for.
"We don't focus on backward-looking traits," said Todd. "We're looking for companies that have accelerating growth and excellent opportunities to continue to accelerate their growth."
If a stock has momentum working in its favor all the better. An even bigger plus is this: if the stock the co-managers have identified as a long-term growth company isn't yet appreciated for secular growth potential by the rest of Wall Street.
Voya Large-Cap Growth, a 2025 IBD Best Mutual Funds Award winner, has delivered market beating returns in the past one-, three-, five- and 10-year period ending Dec. 31, 2024.
Dealing With The Correction
Like most growth funds, Voya Large-Cap Growth has been hurt by the recent correction due to uncertainty about President Donald Trump's tariff policy, fears of recession and a pullback in once red-hot AI stocks. The $706.1 million-in-assets fund is down 10.9% in the past year through April 25, in line with the decline in the S&P 500. The top-performing fund has been a consistent performer over the long haul, though, with its 12.36% annual total return over the past 10 years outpacing the benchmark S&P 500's 12.02% annual gain.
The fund's focus is on delivering consistent performance in all market environments.
One of the key drivers of this IBD best mutual funds award winner is its broad definition of growth. It doesn't just focus on, say, so-called disrupter companies or momentum stocks.
Putting Picks In Three Buckets By Best Mutual Fund
In fact, the top-performing fund focuses on three different buckets of growth names.
Voya Large-Cap Growth does own some so-called disrupters. These are companies that are creating new markets or growing existing ones with their products and services. These stocks tend to be in growth sectors of the market, such as technology, communications services as well as some consumer discretionary stocks and health care names.
"These companies are driving demand for a market that's growing significantly faster than GDP (or the economy)," said Todd.
Stocks That Fit The Bill For Best Mutual Fund
Stocks in Voya Large-Cap Growth fund that fit that criteria include names like AppLovin, whose AI software helps gaming companies boost and better target digital advertising. Another disrupter the fund owns is Palantir, which specializes in software platforms for big data analytics. A health care stock that fits the bill is Intuitive Surgical, best known for its robotic products used in minimally invasive surgeries.
The fund also owns companies with durable sales and earnings credentials that increase market share over time in existing markets thanks to a differentiated product or service. Holdings in the fund with those traits include retail giant Walmart, drugmaker Eli Lilly and paint supplier Sherwin-Williams.
Riding The Cycle
And the co-managers also buy so-called cyclical growth stocks, or companies whose fortunes rise and fall with the economy over an investment cycle. These stocks tend to outperform when a market cycle turns up but lag when business and the economy slow.
"The growth of these stocks is less stable and less durable," said Todd. "But when there's an upturn in the cycle, they're going to gain share."
A good example of a cyclical stock in the top-performing fund would be a name like aerospace company TransDigm Group.
Capitalizing On The U.S.
Like most growth funds, Voya Large-Cap Growth owns megacap tech stocks, such as top holding Apple, Microsoft, Nvidia, Amazon.com, Meta Platforms and Google parent Alphabet.
There are fears on Wall Street that a decade of American business leadership around the world, dubbed American exceptionalism, may be waning due to fallout from Trump administration trade policy and increased foreign competition in AI. But the U.S. remains a great place to invest, says Finnegan.
"Our view is that we don't think U.S. exceptionalism is dead," said Finnegan. "The investment outlook for U.S. companies is still very strong."
The elements are still in place in America to continue to feed the boom in innovation, says Finnegan.
Tariffs Cause Issues For Best Mutual Fund
But there's no denying that uncertainty related to U.S. trade policy is causing question marks, adds Finnegan.
No doubt, there's an overhang caused by U.S. companies not knowing how the trade war with the rest of the world will end. The inability of companies to plan for the future due to uncertainty is a negative for the economy.
"Policy uncertainty does have a big impact on potential growth and market opportunity," said Todd. "For companies directly implicated in the tariffs, the question is, what are the implications for profit margins and growth rates."
The secondary risk relates to the lack of certainty and all the unknowns facing CEOs.
"Potentially, companies could sit on their hands and wait for more certainty before deciding where to and when to make investments," said Todd.
Concentrating On Now
For now, that uncertainty is prompting the managers of Voya Large-Cap Growth to take a more near-term approach to the market. For now, the focus of the fund is to stick with quality companies with strong free cash flow, durable growth models and good stock return profiles.
Currently, the top-performing mutual fund has a lower risk profile than the broad market. Its so-called beta, which measures the fund's volatility versus the S&P 500, was 0.97 at the end of the first quarter. A beta below 1 means the current portfolio is less volatile than the market.
"Clearly, we're trying to avoid those companies that are really in the crosshairs of the tariffs," said Todd.
