Why a Good Start to 2016 Has Turned Average for TWCGX

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Performance evaluation of the American Century Growth Fund

As of May 27, 2016, the American Century Growth Fund Investor Class (TWCGX) had posted a rise of 0.2% YTD (year-to-date), placing it fourth among the ten funds in this review.

We have graphed TWCGX’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 its above-average performance so far this year.

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Portfolio composition and contribution to returns

The consumer discretionary and energy sectors are a close first and second in terms of positive contributions to TWCGX’s returns in 2016. Consumer discretionary stocks have been led by Comcast (CMCSA), with TJX Companies (TJX) playing an important role as well.

The sector would be doing better if Expedia (EXPE) and TripAdvisor (TRIP) were not dragging on it. Meanwhile, both energy sector holdings Concho Resources (CXO) and Halliburton Company (HAL) have contributed positively.

The consumer staples and industrials sectors are a close third and fourth to the consumer discretionary and energy sectors. Consumer staples have been helped by Philip Morris International (PM) and Church & Dwight Co. (CHD).

However, Kroger (KR) has emerged as a substantial drag on the consumer staples sector. Meanwhile, 3M Company (MMM) and Lockheed Martin (LMT) have helped industrials, but they’ve been held back by the Boeing Company (BA).

Stocks from the healthcare sector have undone nearly all of the good done by other sectors. Perrigo Company (PRGO) and Express Scripts Holding Company (ESRX) have driven down other contributions from healthcare.

Comparison with QQQ

TWCGX has done better than QQQ in 2016 so far. However, its stock picks from the information technology and telecommunications services sectors have done worse than those making up these sectors in QQQ.

Investor takeaway

TWCGX has emerged as an above-average performer among its peer group in 2016. However, its performance is far from impressive. The sectors that have contributed positively to its returns have done so only in small amounts, and substantial outperformance hasn’t been seen in any sector. Long-term performance will better indicate whether the fund has the potential to outperform when the business cycle turns.

In the next article, we’ll look at the Vanguard Capital Opportunity Fund Investor Shares (VHCOX).

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