How Financials Held MFEGX in 1Q16



Performance evaluation of the MFS Growth Fund

The MFS Growth Fund Class A (MFEGX) fell 1.6% in 1Q16, placing it fourth among the 12 funds in this review. MFEGX fell 1.8% for the one-year period ended March 2016 and ranked seventh among its peer group.

Meanwhile, from December’s end 2015 until April 20, 2016, the fund rose 1.7%. We have 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 this above-average showing by the fund in 1Q16.

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Portfolio composition and contribution to returns

The healthcare sector dragged on MFEGX in 1Q16. Alexion Pharmaceuticals (ALXN) contributed the most to the sector’s negative returns. Other detractors included Regeneron Pharmaceuticals (REGN), Celgene (CELG), and McKesson (MCK). Positive contributions from a few stocks were inconsequential.

A handful of stock picks from the financial sector emerged as the second-largest negative contributors to MFEGX’s returns. They were led by Intercontinental Exchange (ICE) and Charles Schwab (SCHW). American Tower (AMT) reduced the negative contributions somewhat.

The consumer discretionary and consumer staples sectors reduced the overall drag on MFEGX by contributing positively in the period. The sector was led by TJX Companies (TJX), Ross Stores (ROST), and Dollar General (DG). However, Amazon (AMZN) spoiled the sector’s good showing to a large extent.

Meanwhile, the consumer staples sector saw many stocks contributing positively to the fund, though Mondelez International (MDLZ) dragged slightly.

Comparison with IVW

IVW outperformed MFEGX in terms of total returns in 1Q16. Though MFEGX’s picks from the consumer discretionary and materials sectors did better than IVW’s picks, IVW beat MFEGX in all other sectors. Healthcare, information technology, consumer staples, and financials were the key sectors where IVW grossly outperformed MFEGX.

Investor takeaway

MFEGX has been an average performer overall. Its picks from the consumer-oriented and materials sectors have worked, but other sectors have disappointed. Existing investors would be well-advised to wait and see how 2016 pans out for the fund as we move into the second quarter.

We’ll look at the JPMorgan Large Cap Growth Fund Class A (OLGAX) in the next article.


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