Reasons behind the Superior YTD Performance of the Vanguard PRIMECAP Fund

David Ashworth - Author

Oct. 24 2016, Updated 5:04 p.m. ET

VPMCX: performance evaluation

The Vanguard PRIMECAP Fund Investor Shares (VPMCX) has been having a terrific 2016. In the YTD (year-to-date) period as well as the one-year period until October 14, the fund has been the best performer in our group of 12 funds chosen for review in this series. We’ve 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 VPMCX’s stellar YTD performance.

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Contribution to returns

The stock picks from the information technology sector are primarily responsible for VPMCX’s superb YTD showing. Texas Instruments (TXN) has led contributors from the sector and has been supported by NVIDIA (NVDA), Adobe Systems (ADBE), and Hewlett Packard Enterprise (HPE). Although Telefonaktiebolaget LM Ericsson (ERIC) has dragged on the sector a little, the stock has not been able to make much dent in the sector’s overall strong performance.

Industrials have also helped the fund post strong gains this year. The sector has been led by FedEx (FDX), with help from stocks like Caterpillar (CAT). The sector is not without detractors, however,with Airbus Group (EADSY) leading negative contributors.

Among other sectors, Marsh & McLennan Companies (MMC) has pulled financials up, and EOG Resources (EOG) has fired for the energy sector, while AT&T (T) has been dialing things up for telecom services.

On the other end of the spectrum, healthcare and consumer discretionary have reduced overall positive contributions. Biogen (BIIB) and Roche Holding AG (RHHBY) have jointly led the sector down, with assistance from Eli Lilly (LLY). Meanwhile, though Sony (SNE) and Ross Stores (ROST) have done their best to pull the consumer discretionary sector into the green, the drag created by L Brands (LB) was even stronger and has pushed the sector into negative territory.

Investor takeaway

Still, VPMCX is head and shoulders above all funds in this review, when it comes to the quantum of positive contributions from the information technology sector. Perhaps even more importantly, VPMCX’s stock picks from the healthcare sector have not performed as poorly as several of healthcare has for peers. VPMCX is one of the very few actively managed funds that has beaten both the passive funds as well as the SPDR S&P 500 ETF Trust (SPY).

In the last part of this series, we’ll take a look at the overall picture that emerges from this analysis.


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