Performance evaluation of PLGAX
As of May 27, 2016, the Principal LargeCap Growth Fund I Class A (PLGAX) had fallen by 1.4% year-to-date (or YTD) in 2016, making it the second-worst performer among the ten funds in this review.
We’ve graphed PLGAX’s performance against the PowerShares QQQ Trust, Series 1 ETF (QQQ) and the iShares Russell 1000 Growth ETF (IWF). Let’s look at what’s contributed to this fund’s poor performance in 2016 so far.
Portfolio composition and contribution to returns
The healthcare sector has dragged the most on PLGAX YTD in 2016. Alexion Pharmaceuticals (ALXN) has been the worst performer in the sector. Other major detractors include Valeant Pharmaceuticals International (VRX) and Allergan (AGN).
The consumer discretionary and financials sectors have been a distant second and third, respectively, in terms of negative contributions in 2016. TripAdvisor (TRIP) has been the worst performer in the consumer discretionary sector. However, Amazon (AMZN) has somewhat reduced the drag on the sector. Negative contributions from several stocks, primarily Morgan Stanley (MS) and Charles Schwab (SCHW), have hurt the financials sector.
The information technology and materials sectors have sizably reduced the poor performance of the PLGAX. Facebook (FB) has been the primary driving force behind the technology sector, while Vulcan Materials Company (VMC) has helped the materials sector to contribute positively.
Comparison with QQQ
Even after a poor showing in 2016 so far, PLGAX has been able to do better than passively managed QQQ due to better showings from the consumer staples, healthcare, and information technology sectors. Positive contributions from the materials sector have also helped PLGAX. QQQ isn’t invested in this sector.
PLGAX has had a forgettable 2016 so far. Nearly nothing has worked for the fund, and its large number of holdings have failed to steer it toward a better performance. The purpose of the fund is to provide broad-based exposure to large-cap stocks instead of focusing on a smaller number of stocks. The market conditions in 2016 have not favored this strategy so far.
We’ll look at the Wells Fargo Growth Fund Class A (SGRAX) in the next article.