Inside the Vanguard PRIMECAP Fund Portfolio



Vanguard PRIMECAP Fund: overview

The Vanguard PRIMECAP Fund Investor Shares (VPMCX) “invests in stocks considered to have above-average earnings growth potential that is not reflected in their current market prices. The Fund’s portfolio consists predominantly of large- and mid-capitalization stocks.”

Fund literature states that fund managers have a long-term perspective while managing this fund and that they do it with an “extremely low turnover.” Multiple fund managers are involved in investment decisions by the investment adviser to the fund. The portfolio is divided into portions that are managed independently by a manager. The fund literature claims that this provides “diversity of thought.”

Investors should note that the fund may become concentrated in a few sectors, especially in technology and healthcare. Notably, this fund is closed to new investors.

The fund’s assets were invested across 131 stocks as of September 2016, and it was managing assets worth $47.4 billion. As of June (the latest available), its equity holdings included Texas Instruments (TXN), Microsoft (MSFT), Marsh & McLennan (MMC), L Brands (LB), and Intel (INTC).

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Portfolio changes in the Vanguard PRIMECAP Fund

VPMCX counts information technology, healthcare, and industrials as its core invested sectors. These three sectors make up a combined 80% of the portfolio. No other sector apart from the above three makes up over one-tenth of the fund’s assets. The fund is not invested in the real estate and utilities sectors. Interestingly, the consumer staples sector makes up only 0.4% of the fund’s portfolio.

Compared to the S&P 500 index, VPMCX is markedly underweight in the consumer discretionary, consumer staples, energy, financials, materials, and telecom services sectors. It’s overweight, however, healthcare, industrials, and information technology sectors.

We’ve looked at the fund’s quarterly portfolios for the past three years until September 2016. The information technology sector was the most invested sector three years ago as well. Since then, its share of assets has risen further. On the other hand, healthcare has seen the opposite fortune, with its portfolio weight having fallen from levels three years ago. Financials and industrials have seen their respective shares rise, while energy and materials have seen theirs fall. The fund initiated exposure to telecom services in 3Q15.

In the next article, let’s see how the fund’s investment strategy has fared over various periods as well as what has contributed to its YTD performance.


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