Performance evaluation of VHCOX

As of May 27, 2016, the Vanguard Capital Opportunity Fund Investor Shares (VHCOX) had fallen by 0.8% year-to-date (or YTD) in 2016, placing it as a below-average performer among the ten funds in this review.

We’ve graphed its 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 the fund’s below-average performance so far this year.

A Look at VHCOX’s Less-than-Pleasant 2016 So Far

Portfolio composition and contribution to returns

The healthcare sector has been primarily responsible for driving down the returns of VHCOX YTD in 2016. Biogen (BIIB) and BioMarin Pharmaceutical (BMRN) have been the main drivers behind the sector’s poor showing. Eli Lilly (LLY) and Illumina (ILMN) have played important supporting roles in the sector’s fall as well.

Boston Scientific (BSX) has been the sector’s lone positive contributor, but it hasn’t had much help, so it’s been unable to reduce the negative contributions from other stocks.

The industrials sector has been in a distant second place to healthcare in terms of negative returns. It’s been hurt by negative contributions from United Continental Holdings (UAL) and airline stocks JetBlue Airways (JBLU), American Airlines Group (AAL), and Delta Air Lines (DAL). Some of the drag from these negative contributors has been reduced by FedEx (FDX) and Ritchie Bros. Auctioneers (RBA).

The information technology sector reduced much of the drag from healthcare and other negatively contributing sectors. Nvidia (NVDA) has by far been the biggest positive contributor from the sector, with help from Texas Instruments (TXN) and Trimble Navigation (TRMB), among others.

Investor takeaway

VHCOX has had a less-than-pleasant time in 2016 so far, primarily due to the poor performance of its healthcare sector holdings. However, it has been a good performer in the past.

Three sectors drive the fund’s performance, so investors who desire broader exposure may want to look at other funds to complement this concentrated holding.

In the next article, we’ll take a look at the Vanguard Morgan Growth Fund Investor Shares (VMRGX).

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