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Analyzing American Century Equity Income Fund’s Exposure to Retail

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Nov. 24 2015, Updated 9:40 p.m. ET

YTD performance

The American Century Equity Income Fund Class-A (TWEAX) returned -0.2% for the YTD period ending November 19, 2015. Meanwhile, its benchmark, the Russell 3000 Value, returned 5.1% in the same period.

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TWEAX’s retail exposure

The fund has 15.3% of its assets invested in retail, which comprises of the consumer staples sector with a weight of 13.5% and the consumer discretionary sector with a weight of 1.8%. Meanwhile, the consumer discretionary and the consumer staples sectors form 5.8% and 6.5% of its benchmark, the Russell 3000 Value Index.

Consumer sentiment index

Consumer confidence, measured by the University of Michigan consumer confidence index, measures the degree of optimism that consumers express through their saving and spending. The consumer confidence index increased to 93.1 for November, higher than its consensus estimate of 92. The consumer confidence index rose in November due to lower fuel prices and an improving labor market after a reading of 90 in October and 87.2 in September. Higher consumer sentiment is directly linked to higher consumer spending, which generates more revenue for retail companies.

With the consumer confidence index improving for November, TWEAX, which has 15.3% of its holdings in retail companies, is likely to benefit from consumer optimism in November.

TWEAX holdings in retail stocks

As of September 2015, TWEAX has total assets under management of close to $8.5 billion. The fund’s top holdings in retail include Johnson & Johnson (JNJ) with a portfolio weight of 4%, PepsiCo (PEP) with a portfolio weight of 3.2%, Walmart (WMT) with a portfolio weight of 2.9%, Procter & Gamble Company (PG) with a portfolio weight of 2.5%, and General Mills (GIS) with a portfolio weight of 1.9%.

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