What Could Turn around a Dull 2016 for the Invesco American Franchise Fund?



Performance evaluation

The Invesco American Franchise Fund Class A (VAFAX) has fallen by 0.5% YTD (year-to-date) in 2016. This decline places it as a below-average performer among the pack of 12 funds we’ve chosen for this review. Except for the three-month period, the fund has remained a below-average performer across the period plotted in the graph below.

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 in YTD 2016.

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Portfolio composition and contribution to returns

Stock picks from both consumer-focused sectors—discretionary and staples—have done very well in 2016 so far. Philip Morris International (PM) has helped consumer staples along with contributions from Tyson Foods (TSN) and Altria Group (MO). No major negative contributors have helped the sector. Meanwhile, Amazon.com (AMZN), Sony (SNE), and Lowe’s Companies (LOW) have helped the consumer discretionary sector post gains. Negative contributions, by Carnival (CCL), in particular, have chipped away at some gains.

Industrials have contributed positively due to Republic Services (RSG) and Raytheon (RTN), among others. Sprint (S), the sole holding from the telecom services sector, has been a positive contributor.

Healthcare and information technology sectors have dragged the most on the fund. Healthcare has been led down by Alkermes (ALKS). Other detractors include Celgene (CELG) and Gilead Sciences (GILD). Even though Facebook (FB) and Activision Blizzard (ATVI) have been large positive contributors, negative contributions by LinkedIn (LNKD) and First Data (FDC)—among a host of others—have resulted in a surprisingly poor showing by the tech sector.

Investor takeaways

VAFAX has not performed too badly, but given its company, it’s a below-average performer by a whisker. It has been easily outclassed by the passively managed SPDR S&P 500 ETF (SPY), though, which leads one to question whether paying a higher fee for this fund is justified. At this point, it does not seem so.

In the next part, we’ll take a look at the Vanguard Growth Index Fund Investor Shares (VIGRX).


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