Consumer Discretionary Drove Down OLGAX’s Returns in 1Q16



Performance evaluation of the JPMorgan Large Cap Growth Fund

The JPMorgan Large Cap Growth Fund Class A (OLGAX) fell 6.4% in 1Q16, marking the largest fall among the 12 funds in this review. OLGAX fell 3.7% in the one-year period ended March 2016 and ranked ninth among its peer group.

Meanwhile, from December’s end 2015 until April 20, 2016, the fund rose 1.7%. 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 the fund’s disappointing showing in 1Q16.

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Portfolio composition and contribution to returns

Much like most funds in this review, negative contributions from the healthcare sector were primarily responsible for OLGAX’s poor showing in 1Q16. Regeneron Pharmaceuticals (REGN) was far above all other detractors, which included Vertex Pharmaceuticals (VRTX) and Incyte (INCY). There was one positive contributor from the healthcare sector, but its contribution was negligible.

The consumer discretionary sector was the second-highest negative contributor to OLGAX’s returns in 1Q16. Amazon (AMZN) led the sector’s negative contributors, which included Netflix (NFLX) and Tesla Motors (TSLA). Had it not been for a positive contribution from Comcast (CMCSA), the sector’s negative contribution would have been larger.

The financials sector contributed negatively also, led mainly by the T. Rowe Price Group (TROW). The consumer staples and materials sectors reduced the overall drag on OLGAX by contributing positively for the period. Consumer staples were led by Reynolds American (RAI) but held back by Monster Beverage (MNST). Materials were led by the Sherwin-Williams Company (SHW), with no major negative contributors.

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Comparison with IVW

IVW convincingly outperformed OLGAX in terms of total returns in 1Q16. Except for the materials sector, OLGAX’s stocks picks from all other invested sectors were unable to beat IVW’s picks.

Investor takeaway

Stock picks from the consumer discretionary sector were responsible in a big way for the poor showing by OLGAX in 1Q16.

Though the negative contribution from the healthcare sector was much higher than from the consumer discretionary sector, it was the latter that really drove down overall returns. Healthcare presented a challenge to all funds in this review, with most funds faltering.

Those interested in investing in OLGAX should take a look at how the fund performed during the recession.

In the next article, we’ll look at the ClearBridge Aggressive Growth Fund Class A (SHRAX).


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