uploads///Portfolio Breakdown of the FKGRX

Understanding the Portfolio Changes in the Franklin Growth Fund so Far in 2016

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Jul. 22 2016, Published 6:53 p.m. ET

Fund overview

The Franklin Growth Fund Class A (FKGRX) invests “substantially in the equity securities of companies that are leaders in their industries, and which the managers believe are suitable for a buy-and-hold strategy.”

The fund’s managers employ a bottom-up approach and fundamental analysis to shortlist companies that have the following:

  • the potential to produce sustainable earnings and cash-flow growth
  • strong management teams and financial strength
  • attractive valuations

The fund can invest up to 40% of its assets in smaller companies.

FKGRX’s assets were invested across 178 equity holdings as of March 2016—the latest available data—and it was managing assets worth $11.8 billion as of the end of June. As of June, the fund’s top ten equity holdings included Apple (AAPL), Alaska Air Group (ALK), Northrop Grumman (NOC), Microsoft (MSFT), and Mettler-Toledo International (MTD), which make up a combined 9.8% of the fund’s portfolio.

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Portfolio changes

FKGRX is different from a lot of the peers we’ve chosen for this review. It has industrials as its most-invested sector. Information technology and healthcare, in that order, are the second- and the third-largest sectors. All three sectors command over one-fifth of the fund’s assets apiece and make up a combined 73% of the fund’s portfolio. The fund is not invested in the telecom services sector.

Over the past three years until June 2016, the sectoral allocation of the fund has not changed much. Exposure to consumer staples, healthcare, industrials, and information technology stocks has increased, while exposure to energy and materials has decreased. A noteworthy aspect of the fund is its extremely low turnover. This shows that the fund managers stick to the strategy of holding stocks for a long time.

But how has FKGRX performed YTD in 2016, and what can that performance be attributed to? We’ll investigate these questions in the next part.

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