uploads///Portfolio Breakdown of the VAFAX

Inside the Invesco American Franchise Fund Portfolio


Oct. 24 2016, Published 2:06 p.m. ET

VAFAX: overview

The Invesco American Franchise Fund Class A (VAFAX) invests at least 80% of its assets is US stocks, under normal circumstances. It focuses on the common stocks of large- and mid-cap issuers, and fund managers look for companies that have the potential for earnings or revenue growth. Up to 20% of the fund’s assets may be invested in securities issued by foreign issuers.

The investment adviser’s bottom-up stock selection process pursues alpha, which the fund literature defines as “return on investments in excess of the Russell 1000 Growth Index.” Fund management undertakes “detailed modeling of a company’s financial statements and discussions with company management teams, suppliers, distributors, competitors, and customers,” before arriving at their investible universe.

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The fund’s assets were invested across 66 holdings as of September 2016 and it was managing assets worth $9.2 billion. In the June 2016 portfolio—the latest complete portfolio available—its equity holdings included Philip Morris International (PM), DISH Network (DISH), Carnival (CCL), Republic Services (RSG), and Synchrony Financial (SYF).

Portfolio changes in VAFAX

Information technology, consumer discretionary, and healthcare make up the core holdings of VAFAX. These three make up a combined 77% of the fund’s assets. The fund is not invested in the utilities sector.

A look at the quarterly portfolios of VAFAX for three years until September 2016 shows that exposure to information technology stocks has increased over the period, while exposure to consumer discretionary stocks has broadly remained the same. Health care and consumer staples sectors have witnessed a similar pattern. Exposure to both these sectors had previously risen but has been pared back in the past two quarters. Meanwhile, the industrials sector has seen a sharp fall in allocation.

One aspect of importance is the fund’s very high rate of portfolio turnover. Sectors like consumer discretionary, energy, and financials have seen a lot of stock-level churn during the above period, and this factor may impact investors who prefer a relatively stable portfolio.

But how has VAFAX performed so far 2016, and what can its performance be attributed to? Continue to the next part to find out.


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