1 Sep

Vanguard Capital Opportunity Fund’s YTD 2016 Sector Composition

WRITTEN BY David Ashworth

Vanguard Capital Opportunity Fund overview

The Vanguard Capital Opportunity Fund (VHCOX) invests primarily in US equities, focusing on companies that may attain rapid earnings growth. Although the fund can invest across market caps, it may focus on the mid-cap segment. The fund is closed to new investors.

VHCOX’s fund managers look at mid-cap growth companies that are expected to outperform the market over three to five years. The fund’s literature states that the fund may be volatile in the short term, which is expected due to its mid-cap focus.

Vanguard Capital Opportunity Fund’s YTD 2016 Sector Composition

Biogen (BIIB), Eli Lilly (LLY), BioMarin Pharmaceutical (BMRN), FedEx (FDX), and NetApp (NTAP) were among the fund’s 141 holdings at the end of July. In July 2016, the fund was managing $13.5 billion in assets.

Portfolio changes in the Vanguard Capital Opportunity Fund

Unlike most funds in this review, the Vanguard Capital Opportunity Fund (VHCOX) has healthcare as its highest invested sector, closely edging out the second-place information technology sector. The industrials sector is a distant third.

These three sectors form a combined 83% of the portfolio. Apart from these three, only the consumer discretionary sector forms 10% or more of the assets. The fund is not invested in the consumer staples and utilities sectors.

Compared to the Russell Midcap Growth Index, VHCOX is overweight in the healthcare, information technology, and industrials sectors, while being underweight in all the others.

We’ve looked at the quarterly portfolios of VHCOX for the past three years through June 2016. This is the only fund in this review that has no exposure to the consumer staples sector. Financials have seen their share in the portfolio increase.

Three years ago, stocks from the sector formed 2% of the assets while at present, they form 3.6%. Industrials have also seen their share increase. Although healthcare and tech continue to be the biggest invested sectors, both of their respective shares are lower than they were three years ago.

Another interesting aspect of the fund is its extremely low portfolio turnover. Fund management has hardly changed the stock-level composition of the portfolio. The weights have changed due to market movement, as well as some addition or reduction, but the fund’s management has not exited many stocks completely.

There have not been many additions, either. This shows their conviction in the stocks they have invested in and that they’re invested for the long term.

With this portfolio positioning, how has the Vanguard Capital Opportunity Fund – Investor Shares (VHCOX) fared in YTD 2016, and why has it fared so? Let’s look at that in the next article.

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