Fund Finds Growth In Unusual Places

Now take a look at RiverSource Aggressive Growth (NASDAQ: - ) fund. Its top holdings include an agricultural equipment maker and a firm that makes seats for commercial aircraft.

How can such seemingly bland companies be considered aggressive growth?

"Accelerating earnings and improving price performance," said Brad Eixmann, an American Century asset manager, who, along with Glenn Fogle and David Holland, runs half of this RiverSource fund.

"From a fundamental perspective, we're looking for a company with a new product out there, one with favorable market dynamics, that's in the right place at the right time," Eixmann said. "On the technical side, we're always after stocks that are outperforming the rest of the market."

American Century and Turner Investment Partners each runs 50% of the fund, entirely independent of each other. The fund was up 31.50% this year going into Friday vs. 19.98% for its mid-cap growth peers tracked by Morningstar and 11.39% for the S&P 500.

The fund sports a three-year return of 20.16% vs. 16.89% for its peers and 13.24% for the S&P 500.

The fund's top 20 holdings as of July 31 included tractor builder AGCO (NYSE: - ), aircraft equipment supplier BEA Aerospace (NasdaqGS: - ) and video game store chain GameStop (NYSE: - ).

The fund seeks mid-cap stocks with a market cap of $1 billion to $20 billion. Beyond that, there are few unbreakable rules when it comes to American Century's approach. It likens its half of the RiverSource portfolio to American Century Vista Fund (NASDAQ: - ).

Fundamental,Technical Strength

Eixmann says American Century's tack mirrors the CAN SLIM approach, an investing method devised by IBD's founder and chairman, William O'Neil. In CAN SLIM, the focus is on fundamental strength and superior price performance. A stock's reputation among the masses or the mainstream media means little to nothing.

AGCO embodies that approach. American Century first bought the stock in January, watching it nearly double since then.

Eixmann says the fund's managers like to play off themes. In this case, increasing demand for food in sprawling nations such as India and China, combined with booming ethanol demand and surging corn, wheat and soybean prices, prompted a closer look at AGCO. The Duluth, Ga.-based firm has benefited from global and domestic demand in racking up accelerating sales and earnings growth after a rough few quarters in 2005 and 2006. Accelerating fundamentals are a hallmark of most stocks that the fund buys.

But is there a disconnect involved, when an aggressive growth fund jumps into an agricultural stock? Not at all, says Eixmann.

"A lot of traditional growth managers might not look at AGCO, since they'll think it's boring and cyclical, that its growth won't last," he said. "But one of the reasons we've done so well on the American Century side is that we'll buy anything."

By following the market's trends, Eixmann and his co-managers have steered clear of sectors that have struggled lately. American Century has avoided the consumer discretionary sector, including high-fashion retailers and especially home builders.

As part of the fund's never-say-never philosophy, Eixmann and company have made an exception there too. GameStop fits the model of a traditional retailer, insofar as it operates nearly 5,000 GameStop and EB Games stores worldwide.

Still, GameStop has tapped into one of the most powerful uptrends for the video game industry.

The firm notched sales growth of 20% or better in each of the past 10 quarters.

Earnings growth accelerated to 367% from 38% over the past three quarters.