ADT, FCX Saved the Day for SHRAX in 1Q16

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Performance evaluation of the ClearBridge Aggressive Growth Fund

The ClearBridge Aggressive Growth Fund Class A (SHRAX) fell 2.7% in 1Q16, making it an average performer among the 12 funds chosen for this review. SHRAX fell by 9.7% in the one-year period ended March 2016, placing it firmly at the bottom of the pack.

From the end of December 2015 until April 20, 2016, the fund rose just 0.6%, the smallest rise posted among its peers. We’ve graphed its performance against two ETFs: the iShares S&P 500 Growth ETF (IVW) and the iShares Russell 1000 Growth ETF (IWF). Let’s look at what contributed to SHRAX’s average showing in 1Q16.

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Portfolio composition and contribution to returns

Stocks from the healthcare sector were primarily responsible for SHRAX’s average showing in 1Q16. Biogen (BIIB) was the largest individual negative contributor, followed by Allergan (AGN) and Valeant Pharmaceuticals International (VRX). UnitedHealth Group (UNH) contributed positively to the sector’s earnings, but without help, it was unable to reduce the sector’s negative contribution to SHRAX’s returns.

SHRAX’s second-most invested sector, information technology, was also the second-highest negative contributor to its returns in 1Q16. Class A shares of Broadcom led the sector down, along with Twitter (TWTR) and Seagate Technology (STX). Facebook (FB) was able to reduce the sector’s negative contributions to some degree.

Given that the fund’s top two invested sectors emerged as its top two negative contributors, what saved it from having a horrible 1Q16?

ADT (ADT) powered the industrial sector’s returns with help from Tyco International (TYC) and Fluor (FLR). The absence of any meaningful negative contribution from the industrial sector also helped. Industrials had help from the materials sector, which was led by Freeport-McMoRan (FCX).

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Comparison with IVW

Though SHRAX underperformed IVW, its stock picks from the consumer discretionary, industrials, and materials sectors convincingly beat IVW’s. On the other hand, SHRAX’s information technology and healthcare stocks couldn’t match IVW’s.

Investor takeaway

SHRAX is unique, and its sectoral composition is true to its aggressive growth stance. This stance has led it to skip the consumer staples and utilities sectors completely. This unique positioning may complement the fund, which is heavy on information technology and staples stocks.

SHRAX’s high energy exposure disappointed, as the sector didn’t post impressive returns in 1Q16. However, the fund may become a compelling investment choice if the US economy powers ahead.

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

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