What Sector Powered FKGRX in 1Q16?

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Performance evaluation of the Franklin Growth Fund

The Franklin Growth Fund Class A (FKGRX) rose 0.2% in 1Q16, making it one of only three out of 12 funds in this review to post gains for the period. FKGRX fell 1.1% in the one-year period ended March 2016, and it was placed fourth among its peer group.

Meanwhile, from the end of December 2015 until April 20, 2016, the fund rose 2.0%. 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 FKGRX’s good showing in 1Q16.

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Portfolio composition and contribution to returns

Industrials, the sector in which FKGRX invests the most, contributed the most to its returns in 1Q16. W. W. Grainger (GWW) was the standout performer among industrials, followed closely by 3M Company (MMM). There were substantial drags from the Boeing Company (BA) and Sensata Technologies Holding (ST), though, which reduced some of the contributions from the sector.

Information technology was the second-largest positive contributor to the fund, primarily due to Apple (AAPL). Oracle (ORCL) and Trimble Navigation (TRMB) also contributed positively to the sector. On the other hand, ServiceNow (NOW) was a major detractor from the sector.

Healthcare was the biggest negative contributor to FKGRX’s returns in 1Q16. Biogen (BIIB), Allergan (AGN), and Eli Lilly (LLY) were the major negative contributors to the sector’s returns. However, Teleflex (TFX) reduced some of the negative contributions. Meanwhile, Amazon (AMZN) was the primary reason that the consumer discretionary sector emerged as a negative contributor for the period.

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Comparison with IVW

Though FKGRX was in the green in 1Q16, it couldn’t outdo IVW in terms of total returns. Its picks from the consumer discretionary and consumer staples sectors underperformed their counterparts in IVW.

Meanwhile, the active fund did better than IVW as far as the performance of the materials, industrials, and healthcare sectors were concerned.

Investor takeaway

FKGRX could be the instrument of choice for investors who are optimistic about the industrials sector and for those who prefer managers to stick to their stocks rather than to churn them around. Sticking with the fund for the long term and pairing it with one with a knack for picking good information technology stocks could be a sound investment strategy.

Let’s move to the next fund under review: the Harbor Capital Appreciation Fund Investor Class (HCAIX).

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