Running to glory with care and a 5.5% load

Fund profile

Goldman Capital Growth uses prudence and excels

Dollars & Sense

November 07, 1999|By MORNINGSTAR

Goldman Sachs Capital Growth Fund has found its own path to success.

Since Herb Ehlers and his team took charge in January 1997, this fund has been cruising in high gear. Despite its above-average expense ratio, the fund has outrun the S&P 500 index by a wide margin, a feat few of its large-blend rivals can claim. Investors have apparently taken notice: Ehlers reports that new money has been steadily flowing in during the first quarter of 1999.

As do many of his peers, Ehlers follows a growth-at-a-reasonable-price strategy. He targets companies that generate lots of cash and enjoy dominant market positions. He then buys them when they're selling at discounts relative to his estimates of their earnings growth.

This approach has led Ehlers to some of the usual suspects such as Microsoft and Lucent Technologies. But, unlike many of the most successful large-blend offerings, the fund hasn't maintained a huge weighting in technology stocks, primarily because Ehlers has been put off by those issues' valuations.

Instead, Ehlers has focused on cable and other media issues, stashing 16 percent of assets in this area. Since 1997, investors have cheered the cable and media industry's drive to provide consumers with a variety of services over cable lines. As a result of the talk surrounding the eventual marriage of cable and the Internet, prices of holdings such as Time Warner, Liberty Media Group and Media One have skyrocketed.

The fund also owes some of its recent success to the sudden resurgence of financials, such as Bank America and Citigroup.

The fund's year-to-date ranking through April lands in the category's top quartile.

This offering cuts a fine figure as a core holding. It's also fast becoming one of the large-blend group's better entrants.

Goldman Sachs Capital Growth A

Fund managers: Steve Barry, Herbert Ehlers, George Adler, Robert Collins, Gregory Ekizian, David Shell, Ernest Segundo Jr

Largest investment sector: Services Style: The fund's median investment is in growth stock of companies with large market capitalizations.

Total returns as of 10/29/99

Year-to-date: 13.89

One year: 31.87

Three-year annualized: 30.85

Five-year annualized: 25.03

Risk vs. domestic equity funds: Average

Morningstar rating: 4 Stars

Maximum sales charge: 5.50 percent

Phone Number: 800-526-7384

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