How Energy Dragged Down the American Funds AMCAP Fund

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Performance evaluation

The American Funds AMCAP Fund Class A (AMCPX) rose by 7.0% in October 2015 over the previous month. In the three- and six-month periods ending on October 30, the fund fell by 3.0% and 1.6%, respectively. In the YTD (year-to-date) period, the fund was up by 2.2% while in the one year period, it has risen 3.7%. From October-end until November 19, the fund is up 0.3%.

The fund’s performance has been very consistent, but not in a good way. Among the nine funds in this review, it has finished among the worst in all periods, except the three-month period ended October 2015.

Let’s look at what contributed to this consistently poor performance by the fund.

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Portfolio composition and contribution to returns

AMCPX has a long track-record, having been created in May 1967. The latest complete portfolio available for the fund is as of September 2015. Hence, for our analysis, we’ll take that portfolio as our base and consider valuation changes as they stood at the end of October 2015. All portfolio percentages mentioned from here on refer to weights according to changes in valuation between September and October.

Stocks from the consumer discretionary sector were the biggest positive contributors in the one-year period ending in October 2015. Of the 27 stocks that were part of the portfolio at some point of time in the period, Netflix (NFLX) was the biggest positive contributor by far. Although at present, Netflix stock forms only 2.2% of the fund’s portfolio, it previously formed an average 15.1% of the portfolio between March and May 2015. This large position during the period helped the consumer discretionary sector post such high returns. Meanwhile, Ralph Lauren Corporation (RL) was the main detractor.

The information technology sector was the second biggest contributor to returns. Avago Technologies Limited (AVGO) led to gainers, closely followed by the Class A shares of Accenture (ACN). Meanwhile, Qorvo (QRVO) was one of the detractors.

Reasons for poor performance

The energy sector was the primary reason this fund emerged as the bottom performer. The sector was the biggest negative contributor to returns and was led down by FMC Technologies (FTI). Southwestern Energy Company (SWN) was another detractor.

Industrials also reduced from the fund’s overall returns. Union Pacific Corporation (UNP) was the primary detractor here, followed by Generac Holdings (GNRC) and Chart Industries (GTLS).

Now let’s move on to the second fund in our series, the Fidelity Blue Chip Growth Fund (FBGRX).

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