Should You Be Cautious about the Scout International Fund?

Performance evaluation of the Scout International Fund

So far, 2016 has been a good year for the most part for the Scout International Fund (UMBWX). The fund stands third for the YTD period through June 17, 2016. However, in the one-year period, the fund placed ninth in its peer group of 12 funds.

We have graphed its performance against two ETFs: the iShares MSCI ACWI Ex-US ETF (ACWX) and the Vanguard FTSE All-World Ex-US ETF (VEU). Let’s look at what has contributed to the fund’s positive performance in YTD 2016.

Should You Be Cautious about the Scout International Fund?

Portfolio composition and contribution to returns

The consumer discretionary sector has been the primary drag on the Scout International Fund (UMBWX) in YTD 2016. Honda Motor Co. (HMC) and Fuji Heavy Industries (FUJHY), among a host of other stocks, are the reason why the sector has done so badly.

Although healthcare is the second biggest negative contributor, the contribution is not as large as in some of its peer funds. The negative contribution by Bayer (BAYZF) and Novo Nordisk A/S (NVO) has been balanced to a large degree by the positive contribution from Mettler-Toledo International (MTD).

Industrials have been hurt by several stocks, including Fanuc Corporation (FANUY) and Ryanair Holdings (RYAAY). However, positive contributions from stocks like Siemens Aktiengesellschaft (SIEGY) and ABB Ltd. (ABB), among others, have been instrumental in reducing the negative contribution.

The information technology sector has done the most to reduce the overall negative showing by UMBWX. Meanwhile, Canadian Natural Resources (CNQ), Enbridge (ENB), and Royal Dutch Shell (RDS.B) have powered the energy sector.

Investor takeaway

UMBWX has had a reasonably good 2016 so far. However, the past three-odd months have not been great. Although a low portfolio turnover is appreciable, it has to translate into performance. Investors should watch closely for further changes in the fund’s performance in order to decide whether to stay with this fund or start liquidating.

For now, it has done better than the passively managed ACWX. However, with the recent period not turning out well, it needs to be seen whether this outperformance can be maintained.

Let’s now move on to the Waddell & Reed Advisors Global Growth Fund – Class A (UNCGX).