FKGRX: A Great Year so Far, but What Else Should We Consider?



The Franklin Growth Fund: Overview

The Franklin Growth Fund – Class A (FKGRX) is one of the smaller fund in this review in terms of asset size. At the end of January 2016, it was managing assets worth $11.0 billion. As of December 2015, its assets were spread across 156 holdings and included stocks of Apple (AAPL), Alaska Air Group (ALK), Northrop Grumman (NOC), The Boeing Company (BA), and Microsoft (MSFT), which comprise a combined 10.2% of the fund’s portfolio.

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The Franklin Growth Fund’s performance

From a purely NAV (net asset value) return standpoint, the FKGRX had a great one-year period ended February 12, 2016, placing second among the 12 funds in this review. However, it had a disappointing 2015, placing tenth.

Other metrics

The FKGRX’s standard deviation, or the volatility of returns, in the one-year period ended February 12 was 16.3%. This was lower than the S&P 500’s 16.4%, and much lower than the peer group’s average of 18.6%.

The fund’s risk-adjusted returns, calculated by the Sharpe ratio, amounted to -0.59, worse than the S&P 500’s -0.47 for the one-year period ended February 12. For 2015, the fund’s risk-adjusted returns were a little better than the index’s, but lagged a lot behind those of its peers. Even though the fund’s point-to-point return performance was poor for 2015, its volatility, which was the lowest among its peers, improved its risk-adjusted performance.

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The information ratio, calculated with the S&P 500 as the benchmark, was -0.7 for the one-year period ended February 12—the second worst among the 12 peers. The information ratio measures the fund manager’s consistency and ability to generate excess returns over a benchmark. However, we can’t evaluate a negative information ratio. This measure fared better in 2015.

A note to investors

The FKGRX has contained volatility well. In 2016, its returns were less volatile than those of all of its peers but one. During times like these, the return-generating ability is under question. Even though the fund fared better in this aspect in 2015, it still lagged behind eight of its peers. Investors should wait a bit more before allocating their resources to this fund to see whether it is able to generate returns and contain volatility. In the next article, we’ll look at the Harbor Capital Appreciation Fund – Investor Class (HCAIX).


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