Not all growth mutual funds take a bite of Apple

The largest holding in his Pax World Growth Fund is Apple Inc., and shares of the technology icon are up 44 percent. That's four times more than the broader market. Yet Trzcinka is being questioned about the fund's 12.5 percent return. Although that's a strong result just four months into the year, it trails more than 80 percent of the fund's large-cap growth stock peers.

"It's related to one stock: Apple," says Trzcinka, whose strong long-term record has earned the fund a 4-star rating from Morningstar.

Stock of the world's most valuable company recently made up 2.5 percent of the fund. It's not an unusually large position, but it's the fund's biggest single holding, slightly more than second and third-largest ones, Google and Qualcomm.

Apple shares are so valuable that they make up nearly 7 percent of a growth-stock index that Pax World Growth (PXWGX) uses as a benchmark. So Trzcinka would need to nearly triple the fund's stake in Apple to align with the index.

With its enormous weighting in the market and strong recent gains, Apple is having a huge impact on performance of large-cap growth funds this year. With a few exceptions, those owning a lot of Apple are beating a majority of their peers. Most large-growth funds that own relatively little Apple are lagging.

One example: Nearly 18 percent of the Matthew 25 fund (MXXVX) was recently invested in Apple, and the fund's 23 percent return this year is in the top 1 percent among large-cap growth funds.

Apple's importance to large-growth mutual funds has become so great that managers face a crucial question. For most, it's a matter of how much Apple to own, not whether to own it or not.

More than 84 percent of large-growth funds own Apple, according to a recent Morningstar analysis.

Even funds that normally wouldn't invest in a growth-oriented stock like Apple are getting in. Morningstar found that one of every five value-oriented funds owns Apple.

The case for Apple is easy to see. The company reported selling 35 million iPhones in the first quarter, almost twice as many as a year ago. Its earnings were $11.6 billion, nearly double the year-ago total, and revenue jumped 59 percent. Apple beat analysts' expectations on both key performance measures.

Yet there are large-growth fund managers like Trzcinka who continue to argue that Apple isn't necessarily a great investment. He says Apple has top products, but believes long-term prospects aren't as good as the stock's price implies.

"Its revenue projections assume that every new product introduction will be a hit," Trzcinka says. "This is especially worrisome given Apple's short product cycle."