Why Is the ClearBridge Aggressive Growth Fund Lagging behind Peers?

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Oct. 24 2016, Updated 7:04 p.m. ET

SHRAX: performance evaluation

The ClearBridge Aggressive Growth Fund Class A (SHRAX) has been a below average performer YTD (year-to-date) in 2016. The past year until October 14 was particularly poor for the fund as it placed dead last among the 12 peers we’ve chosen for this review. We have graphed the fund’s performance against two ETFs: the iShares S&P 500 Growth ETF (IVW) and the iShares Russell 1000 Growth ETF (IWF).

Now let’s look at what has contributed to this below-average performance by the fund so far in 2016.

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Contribution to returns

Although the energy sector makes up a little over one-tenth of SHRAX’s portfolio, energy has emerged as the biggest positive contributor to the fund YTD. Anadarko Petroleum (APC) has fueled gains in the sector, with help from Newfield Exploration (NFX), but Weatherford International (WFT) has weighed heavily on the sector’s returns.

The information technology and industrials sectors have contributed equally to the fund. While Facebook (FB) and Broadcom Limited (AVGO) have jointly led technology stocks, ADT Corp (ADT) and L-3 Communications Holdings (LLL) have done the same for industrials. ADT was acquired earlier this year. Nuance Communications (NUAN) has weighed down the tech sector.

Meanwhile, Freeport-McMoRan (FCX) has helped the materials sector’s contributions, and AT&T (T) has helped telecom services post gains in the fund.

But these gains in SHRAX have been substantially offset by the healthcare sector. Allergan (AGN), Valeant Pharmaceuticals (VRX), Ionis Pharmaceuticals (IONS), and Vertex Pharmaceuticals (VRTX) have been the chief detractors, though UnitedHealth Group (UNH) has helped out with high positive contributions.

Investor takeaways

SHRAX is positioned differently than its 11 peers in this review. If the top invested sector does poorly, it nearly ensures a below average performance. Although returns from the consumer discretionary sector have been impressive, the information technology sector—even after contributing positively—has disappointed due to sizable negative contributions from particular stocks. Its high energy exposure could be of help as energy prices are rising, but at this juncture, SHRAX doesn’t appear to be very attractive as a core portfolio holding.

In the next article, we’ll look at the T. Rowe Price Blue Chip Growth Fund (TRBCX).

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