By Todd Rosenbluth, CFRA

Unlike products passively tracking an index-based value approach, active fund alternatives can hold stocks that appear attractively valued to living, breathing managers, regardless of their growth attributes. With growth stocks like Apple (AAPL) and Alphabet (GOOGL) leading many value constituents thus far in 2017 even following a pullback Friday, this flexible active approach has been rewarding.

AAPL is up nearly 29% in 2017, even after a Friday selloff. The tech heavyweight held its annual developers conference last week and CFRA equity analyst Angelo Zino views positively enhancements to iOS and a much smarter Siri. Zino thinks the most notable iOS updates announced were a redesigned App Store, new Map features – mall/airport floor plans and lane guidance — new camera features, and an augmented reality developer platform. AAPL also revealed a mostly internal refresh to MacBooks, a new 10.5 inch iPad Pro and HomePod, a new Siri-based home speaker system, at $349, which Zino expect to sell well given superior sound quality, despite being priced above peers.

Meanwhile, GOOGL is up 22% despite pulling back Friday. CFRA equity analyst Scott Kessler downgraded the stock to buy from strong buy in early June, but sees healthy sustainable growth, driven by mobile and YouTube. He also notes Alphabet has more emerging opportunities related to cloud and self-driving car and potential gains related to artificial intelligence and machine learning.

Growth stocks Apple and Alphabet are constituents of the S&P 500 and Russell 1000 Growth indices, subsets of broader, well-known benchmarks used by active managers.

In ranking equity mutual funds, CFRA incorporates holdings-level analysis with traditional mutual fund attributes related to its relative performance record and costs. Some of this year’s outperforming large-cap value mutual funds are ranked favorably to CFRA in part because they hold appealing growth stocks such as Apple and Alphabet.

Fidelity Blue Chip Value Fund (FBCVX) was up 5.0% thus far in 2017, ahead of the S&P 500 Value index, aided by top-10 holdings in AAPL and GOOGL as of the end of the first quarter. Such positions helped to counterbalance traditional value stocks US Bancorp (USB) and Wells Fargo (WFC) that lagged in 2017. FBCVX has an above-average three-year total return, while incurring below-average volatility.

Further supporting its CFRA four star ranking are holdings viewed attractively, with above-average S&P Global Market Intelligence Quality Rankings and an expense ratio of 0.88% that is lower than its peers.

While the T Rowe Price Value Fund (TRVLX) held only AAPL in its top-10 at the end of March and not GOOGL, tech exposure was enhanced by a stake in a strong performing Microsoft (MSFT); AAPL but not MSFT appeared as a top-10 holding at the end of April according to the firm’s website.

These growth stocks helped generate a 8.2% total return and offset the weakness of value-index constituent Pfizer (PFE), which has underperformed the broader market in 2017. CFRA’s four-star ranked TRVLX has a 0.82% expense ratio and has outperformed its peers in the past three years, while incurring moderate volatility.

AAPL, GOOGL and MSFT are current top-10 holdings in iShares S&P 500 Growth (IVW) and iShares Russell 1000 Growth (IWD) and not iShares S&P 500 Value (IVE) and iShares Russell 1000 Value (IWF).

The net expense ratios of 0.20% or less of these passively managed products are appealing and they can help investors from an asset allocation perspective. However, there will always be some active managers that outperform an index approach through astute stock selection. Thus far, in 2017, the above value mutual funds ownership of some traditional growth stocks, due to flexible off-style index decisions, has proven to be rewarding to their shareholders.

Todd Rosenbluth is Director of ETF & Mutual Fund Research at CFRA.