Invesco American Franchise Fund
The Invesco American Franchise Fund Class A (VAFAX) typically invests at least 80% of its assets is US stocks. It focuses on common stocks of large-capitalization and mid-capitalization issuers. Fund managers look for companies that have the potential for earnings or revenue growth. Up to 20% of the fund’s assets may be invested in securities issued by foreign issuers.
The investment adviser’s bottom-up stock selection process pursues “alpha,” which the fund literature defines as “return on investments in excess of the Russell 1000 Growth Index.” Fund management undertakes the “detailed modeling of a company’s financial statements and discussions with company management teams, suppliers, distributors, competitors, and customers,” before arriving at their investable universe.
The fund’s assets were invested across 68 holdings as of March 2016, and it was managing assets worth $8.8 billion as of March’s end. As of December 2015’s portfolio, the latest complete portfolio available, VAFAX’s equity holdings included Class A shares of Alphabet (GOOG), Carnival (CCL), Dish Network (DISH), Philip Morris International (PM), and Southwest Airlines (LUV). These stocks formed 15.2% of VAFAX’s assets.
For this analysis, we’ll be considering VAFAX’s holdings as of December 2015, as that is the fund’s latest available sectoral breakdown. Its holdings post-December reflect valuation-driven changes to its portfolio, not its actual holdings. The fund declares its holdings once per quarter.
The information technology, consumer discretionary, and healthcare sectors are at the core of VAFAX. These three sectors make up a combined 74% of the fund’s assets. The fund is not invested in the utilities sector.
In the past year leading up to March 2016, the fund has increased its exposure to stocks from the information technology and consumer staples sectors. Industrials have also seen a small rise. On the other hand, during the same period, the fund has reduced its exposure to the consumer discretionary, energy, healthcare, and materials sectors.
A word of caution: VAFAX’s portfolio turnover is quite high. It has churned its holdings from the consumer discretionary, energy, and financials sectors, among others, many times over the past year. Investors who aren’t comfortable with a high rate of churn should consider this fact.
Let’s see how has the fund fared across various periods and what has contributed to its performance in 1Q16 in the next article.