Lackluster Healthcare Segment Hurt SHRAX in Year-to-Date 2015


Dec. 31 2015, Updated 12:04 a.m. ET

Performance evaluation

The ClearBridge Aggressive Growth Fund – Class A (SHRAX) fell 0.4% in November 2015 from a month ago, the only fund among 11 to end the month in the red. In the three- and six-month periods ended November 30, the fund rose 1.5% and fell 7.7% respectively.

In the one-year period, the fund fell 2.4%, while from the end of November until December 15, 2015, the fund was down 6.5%, the most among the funds in this review. In the YTD (year-to-date) period, which we’re analyzing, the fund was down by 2.3%, the only fund to register a decline.

So far, 2015 has been less than generous to the SHRAX. It has hovered at the bottom of the pack of 11 funds across the periods under review, including the YTD period. Let’s look at what has contributed to this poor performance by the fund.

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Portfolio composition and contribution to returns

Launched in October 1983, SHRAX’s latest available complete portfolio is as of September 2015. We will use that portfolio as our base and consider valuation changes as they stand at the end of November 2015 for our analysis. All portfolio percentages refer to their weights according to changes in valuation from September to November.

The energy sector was primarily responsible for dragging the fund’s returns into negative territory for the YTD period ended November 2015. Anadarko Petroleum Corporation (APC) and National Oilwell Varco, Inc. (NOV) were the primary negative contributors from the sector. This was high enough to nullify the positive contribution from Newfield Exploration Co. (NFX).

Although materials formed less than 1% of the fund’s portfolio, the sector emerged as the second-largest negative contributor to returns due to Freeport-McMoRan Inc. (FCX).

The consumer discretionary sector helped reduce the negative returns of the fund. Cablevision Systems New York Group (CVC) and AMC Networks Inc. (AMCX) contributed positively from the sector.

Reasons for the poor showing

Apart from negative contributions from sectors like energy, materials, industrials, and information technology, one factor that hurt the fund was the lackluster contribution from the healthcare sector. The sector contributed positively in the period. However, given that it was the top sectoral bet, making up nearly a third of the fund’s assets, the level of positive contribution was subdued. This ensured that it was nearly impossible to wipe out the negative contribution from the other sectors.

For SHRAX, investors may wish to take a patient stance. The fund has low turnover which shows the conviction of fund managers on their stock picks. If they have done well in different market cycles, they may be able to get out of this rut as well.

In the next article, we’ll look at the T. Rowe Price Blue Chip Growth Fund (TRBCX).


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