Exploring VHCOX’s Portfolio Changes



VHCOX overview

The Vanguard Capital Opportunity Fund Investor Shares (VHCOX) invests primarily in US equities, focusing on companies that may attain rapid earnings growth. Though the fund can invest across market capitalizations, it focuses on the mid-cap segment. The fund is closed to new investors.

VHCOX’s managers look at mid-cap growth companies that are expected to outperform the Market over three to five years. The fund’s literature states that it may be volatile in the short-term, which is expected due to its mid-cap focus.

Biogen (BIIB), Eli Lilly (LLY), Southwest Airlines (LUV), BioMarin Pharmaceutical (BMRN), and FedEx (FDX) were among the fund’s 139 holdings as of April 2016’s end. As of April, the fund was managing assets worth $12.8 billion.

Portfolio changes in VHCOX

For this analysis, we’ll be considering VHCOX’s holdings as of December 2015, as that is the most recent available sectoral breakdown. The fund’s holdings after December reflect valuation-driven changes to its portfolio, not its actual holdings.

The healthcare, information technology, and industrials sectors have driven VHCOX’s performance. These three sectors form a combined 83% of the fund’s portfolio. The first two form a combined 65% of the fund’s assets.

Apart the three sectors mentioned above, only the consumer discretionary sector forms 10% or more of VHCOX’s assets. The fund is not invested in the consumer staples or utilities sectors.

Apart from the fund’s not being invested in staples at all, another of its interesting aspects is its low portfolio turnover. The fund’s management has hardly changed the stock-level composition of the portfolio. Weights have changed due to market movement and some additions or reductions, but management hasn’t exited many stocks completely. There haven’t been many additions either.

VHCOX’s low turnover shows its management’s conviction in its chosen stocks. It also shows that VHCOX is invested for the long term.

Let’s see what has contributed to the fund’s performance in 2016 so far in the next article.

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