A Look at the Portfolio Moves Made by FKGRX until 1Q16



Franklin Growth Fund

The Franklin Growth Fund Class A (FKGRX) invests “substantially in the equity securities of companies that are leaders in their industries, and which the managers believe are suitable for a buy-and-hold strategy.”

Fund managers employ a bottom-up approach and fundamental analysis to shortlist companies that have the following:

  • potential to produce sustainable earnings and cash-flow growth
  • strong management teams and financial strength
  • attractive valuation

The fund can invest up to 40% of its assets in small companies.

The fund’s assets were invested across 178 equity holdings as of March 2016, 22 more than a quarter ago. It was managing assets worth $11.9 billion as of March’s end. As of March, its top ten equity holdings included Apple (AAPL), Alaska Air Group (ALK), Northrop Grumman (NOC), Microsoft (MSFT), and Mettler-Toledo International (MTD). These stocks made up a combined 10.6% of the fund’s portfolio.

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Historical portfolios

For this analysis, we’ll be considering holdings as of December 2015, as that is its latest available sectoral breakdown. The fund’s holdings post-December reflect the valuation-driven changes to its portfolio, not its actual holdings. The fund house releases portfolio details once per quarter.

FKGRX is different from many of its peers. Industrials is the sector in which it’s most invested. Information technology and healthcare, in that order, are the second- and the third-largest sectors in the fund. These three sectors command over one-fifth of the fund’s assets each, forming a combined ~74% of its portfolio. The fund is not invested in the telecommunications services sector.

FKGRX’s exposure to information technology stocks has risen slightly, while its exposure to materials stocks has fallen. A noteworthy aspect of the fund is its extremely low rate of turnover, which is praiseworthy. This shows that the fund’s managers stick to the strategy of holding stocks for long periods of time.

For instance, the composition of the consumer discretionary and staples sectors has remained unchanged in FKGRX over the past year, while just one fresh position (SCHW) has been initiated in the financials sector.

In the next article, we’ll see how the fund has fared in 1Q16 and what its performance can be attributed to.


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