Nimble Moves Help Contrafund Win

The Russell large-cap growth index led all style and size indexes in the second quarter. It had not led the pack since Q1 2006.

At $72.6 billion, Contrafund is the world's 12th largest mutual fund. Yet despite its size, Danoff has been nimble enough to find smaller-cap winners.

Four of the top 10 new buys in his latest reporting period were mid caps. Almost 18% of fund assets were in stocks smaller than large caps as of March 31. That flexibility pays off the fund.

That often is hard for big portfolios. If a jumbo fund wheels and deals in smaller stocks, its own trades can drive up share price. So big funds often must focus on slower growing large caps.

After the sharp sell-off that began last month, Contrafund (NASDAQ: - ) was still up 6.87% for the year, going into Monday. Its large-cap growth rivals tracked by Morningstar averaged 5.15%. The S&P 500 was up 2.10%.

For the past three years, the fund's average annual gain was 16.47% vs. 10.70% for its peers and 10.27% for the bogey.

MEMC Electronic Materials (NYSE: - ), a mid cap and top buy, is up 49% so far this year. The silicon wafer maker said July 26 that second-quarter earnings per share skyrocketed 89%, on a sales hike of 28%. Shares rose 5.71%. That was on a day when the market, measured by the S&P 500, tumbled 2.3%.

The company said its gains are largely due to doing more business in solar wafers. Solar wafer business is growing faster than conventional computer wafers. The business also has better pricing power.

Apple Computer (NasdaqGS: - ), a top holding, has been another big driver for the fund. It is up 55% this year.

Still, in the three trading sessions after July 26, the stock lost nearly 10%. Investors were spooked by rumors that Apple might cut output of its hot, new iPhones. But on Aug. 1, Richard Gardner, a Citigroup analyst, told traders to relax.

Bite Of Apple

Even if true, the rumored cuts would be normal adjustments after an initial selling frenzy, Gardner said. The stock's sell-off had created a buying opportunity.

In recent days Apple reported third-quarter results that topped estimates. Earnings per share soared 70%.

The iPhone wasn't the only driver. Macintosh computer sales were up 33% vs. the year-ago period. Sales of iPods were up 21%.

Nuance Communications (NasdaqGS: - ), another top buy, is up 42% this year. The speech-recognition technology firm is a leader in the fast-growing market for voice-enabled mobile devices and services. This year it has gobbled up three key rivals in that field.

EPS has grown at triple-digit pace in four of the past five quarters.

U.S. Steel (NYSE: - ), yet another top buy, is up 25% this year. Still, the stock is off 21% since July 13. It's been hurt by general economic worries and lower metals prices.

It is down 27% since June 8. Investors were disappointed then that a takeover bid from steel maker ThyssenKrupp did not materialize.

Also, EPS growth slowed 14% in Q2.

Hologic (NasdaqGS: - ) is up about 10% this year. The firm makes medical imaging and diagnostic systems. On July 31 it reported an 80% jump in Q3 EPS on a 60% rise in sales. Both earnings and revenue were above estimates of analysts polled by Thomson Financial. The increase stemmed mainly from sales gains by its Selenia digital mammography systems.

Osteoporosis assessment revenue fell.

Off Its Peak

Siemens (NYSE: - ) is up 25% this year. Diversity is a strength. The electronics and electrical engineering firm is active in fields ranging from health care to subways to security systems.

Siemens recently sold its automotive electronics unit to parts supplier and tire maker Continental.

Still, the company has been hit hard in the recent sell-off. It is down 20% off its July 12 peak.