What Has Hurt the JPMorgan Growth Advantage Fund in YTD 2016?

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Performance evaluation of the JPMorgan Growth Advantage Fund

Year-to-date through August 2016 has been a bad period for the JPMorgan Growth Advantage Fund – Class A (VHIAX). It stands tenth among the 12 funds chosen for this review. In the one-year period, the fund placed dead last among its peers.

We have 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 poor performance by the fund in this year so far.

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Contribution to returns

Like most funds in this review, the information technology sector has been the driving force behind the fund’s performance in YTD 2016. Facebook (FB) has outdone all other positively contributing stocks such as Electronic Arts (EA) and Amphenol (APH). However, Palo Alto Networks (PANW), ServiceNow (NOW), and Arista Networks (ANET) have been able to chip away some of the positive contributions.

The consumer discretionary and industrials sectors have also emerged as sizable positive contributors to VHIAX. The consumer discretionary sector was led by ULTA Salon, Cosmetics & Fragrance (ULTA), with Dollar General (DG) and Amazon (AMZN) playing important supporting roles. However, sizable negative contributions from Norwegian Cruise Line Holdings (NCLH), Wayfair (W), and Netflix (NFLX) have capped further gains from the sector.

Meanwhile, the industrials sector has contributed positively due to stocks like Lennox International (LII), Acuity Brands (AYI), and Carlisle Companies (CSL). The sector was not bereft of negative contributors, though, with Stericycle (SRCL), Delta Air Lines (DAL), and SolarCity (SCTY) dragging on the sector.

The healthcare and financials sectors have pummeled VHIAX and reduced the positive contribution. Regeneron Pharmaceuticals (REGN), Gilead Sciences (GILD), and Revance Therapeutics (RVNC) have suppressed the healthcare sector. Meanwhile, CBRE Group (CBG) and Signature Bank (SBNY) have pushed the financials into the red.

Investor takeaways

The VHIAX has had a forgettable 2016 so far. There haven’t been any signs until now that the situation is changing. Negatively contributing stocks being peppered across sectors is the main reason that the fund finds itself among the bottom three funds.

Fund managers’ picks from financials have done especially badly. Prospective investors may want to look for other options to take exposure to large-cap US stocks.

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

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