Healthcare Spoiled PEUGX’s Year-to-Date 2015

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Performance evaluation

The Putnam Europe Equity Fund Class A (PEUGX) was down 1.8% in November 2015 from a month ago. In the three- and six-month periods ended November 30, the fund has fallen 0.4% and 5.7% respectively.

In the trailing-one-year period, the fund has returned 1.0%, while from November’s end until December 22, the fund has fallen 4.5%. In the YTD (year-to-date) period, the one we’ll be analyzing, the fund is up by 4.5%.

The fund didn’t have a good November, as it posted the second-worst performance for the month among the ten funds in this review. However, for the YTD period, it was in fifth place.

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Portfolio composition and contribution to returns

The PEUGX has a long track record, having been started in September 1990. According to its latest geographical disclosure, companies from the United Kingdom, France, and Switzerland are the top three invested geographies, in that order. The top three have remained as-is for the past three months.

The latest complete portfolio available for the fund is as of September 2015. Hence, we will take that portfolio as our base and consider valuation changes as they stand at the end of November 2015 for our analysis. All portfolio percentages mentioned from here on refer to their weights as per changes in valuation from September to November.

Industrials emerged as the top-contributing sector to the fund’s returns for YTD 2015 up to November. The sector was led by Airbus Group (EADSY). However, Siemens Aktiengesellschaft (SIEGY) reduced some of the positive contributions made by the sector.

Consumer staples was a distant second in terms of positive contribution to returns. Ireland-based Kerry Group (KRYAF) was a standout performer from the sector. Unilever (UN) and SABMiller (SBMRY) also contributed positively to the sector’s returns.

While Luxottica Group (LUX) led the consumer discretionary sector, Telecom Italia (TI) led the telecom services sector.

Reasons for poor performance

Financials, consumer discretionary, and healthcare, the top three sectors invested in by the fund, did not contribute substantially to the fund’s returns for the aforementioned period. In fact, healthcare was the biggest sectoral negative contributor for the period, primarily due to Novartis (NVS).

The consumer discretionary and financial sectors contained several stocks that contributed negatively to PEUGX, thus dragging the sectors’ contributions down. The three-month period ended in November has especially been bad for the fund.

Let’s move on to the next fund in this series, the T. Rowe Price European Stock Fund (PRESX).

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