Ongoing volatility and steep declines in U.S. equity markets have caused many investors to question whether or not they should be investing in equities at all.

Two considerations are important to keep in mind. First, current stock valuations are low according to almost any measure. Historically, low valuation levels have created some of the most advantageous conditions for long-term investors, and we are currently seeing bargain prices on some leading companies that are considered growth stocks.

Second, stock markets typically anticipate an economic recovery by five to six months. As a result, stocks may start to advance well before economic data begins indicating a recovery. Assuming economic data begins to improve toward the end of 2009, I would expect to see the performance of many growth equities to potentially improve by the middle of this year as they begin to price in a recovery ahead of the data.

When the economy recovers, it is not unreasonable to think that we may then enter an extended period of modest growth. In our view, this is the ideal backdrop for growth stocks: A period when the market is focused on companies with sustainable growth of cash flow and earnings.

Our Luxembourg-registered growth portfolio, FTIF Franklin U.S. Opportunities Fund has been performing well on a relative basis, for the one-month, three-month, one-year and five-year periods ended January 31, 2009.

We believe the funds' performance can be attributed to the benefits of a disciplined, research-intensive approach to finding and owning the leading growth companies in every industry. Typical holdings in our growth funds tend to have sustainable competitive advantages that allow them to take market share from competitors. We also look to invest in companies with proven management teams and strong financials. These high-quality companies, from our perspective, tend to continue generating sustainable growth even during difficult times.

Examples of companies held by our FTIF Franklin U.S. Opportunities Fund that have been strong contributors include FLIR Systems and Myriad Genetics.

FLIR Systems develops thermal imaging for infrared technology that is used in military and commercial applications. Thermal imaging technology is less expensive and provides more detailed images than traditional black-and-white cameras now embedded in millions of applications around the world. We consider FLIR a market leader in this very strong growth industry.

Health-care company Myriad Genetics has been an exceptional stock for us in recent years. Myriad uses its molecular diagnostic products to assess a person's risk of various forms of cancer. We see a bright future for this company as personalized medicine plays a bigger role in patient diagnosis and treatment.

Please click here for more information on the FTIF Franklin U.S. Opportunities Fund.

Posted: 22 April 2009