This Sector Has Been the Lone Positive for the Vanguard PRIMECAP Fund in 2016


Jul. 22 2016, Published 6:57 p.m. ET

Performance evaluation

The Vanguard PRIMECAP Fund Investor Shares (VPMCX) has risen by 2.1% YTD (year-to-date) in 2016. This places it among above-average performers in the pack of 12 funds we’ve chosen for this review. In the one-year period, the fun places third among its peer group.

We’ve graphed its performance against two ETFs: the iShares S&P 500 Growth ETF (IVW) and the iShares Russell 1000 Growth ETF (IWF). Let’s look at what has contributed to this performance by the fund YTD in 2016.

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Portfolio composition and contribution to returns

The fund management’s picks from the information technology sector have done excellently YTD in 2016. The sector’s contribution to the fund is much higher than by any other fund’s tech stock picks. Texas Instruments (TXN) has led the sector and has had support from several other stocks like NVIDIA (NVDA) and Hewlett Packard Enterprise (HPE). There was some drag from the Class A and C shares of Alphabet (GOOG) and Telefonaktiebolaget LM Ericsson (ERIC).

Telecom services, which consists of AT&T (T), has been the second-biggest positive contributor. Industrials follow closely and have been led by FedEx (FDX). Further gains have been held back by negative contributions from Alaska Air Group (ALK) and Airbus Group SE (EADSY), among others.

The healthcare and consumer discretionary sectors have dragged the most in VPMCX’s performance. Biogen (BIIB) towers above all other negative contributors from the healthcare sector. Had it not been for positive contributions from Boston Scientific (BSX) and Johnson & Johnson (JNJ), among others, the sector would have fared even worse.

Meanwhile, the surprising negative contribution from the consumer discretionary sector came from L Brands (LB), but Sony (SNE) chipped away at some of the negative contributions from LB.

Investor takeaways

VPMCX is unmatched, as far as positive contributions from stocks picks from the information technology sector is concerned. But other sectors have not been much help. The fact that telecom services were the second-biggest positive contributor is testimony to that. But the fund’s very low rate of portfolio turnover is a positive aspect, given its superior performance in the past. Existing investors may not choose to add to their fund holdings, but they have little reason to liquidate.

In the next and final part of this series, we’ll take a look at the overall picture emerging from our analysis.


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