These Stocks Have Been Fueling the Invesco American Franchise Fund

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

VAFAX: performance evaluation

The Invesco American Franchise Fund Class A (VAFAX) finds itself right in the middle of the pack of 12 funds, performance-wise, YTD (year-to-date) in 2016. The past six months have been much better, though, with the fund’s returns placing it as the best performer in the period. We have 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 VAFAX’s performance YTD in 2016.

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Contribution to returns

The information technology sector elbowed out the consumer discretionary sector as VAFAX’s top contributing sector YTD in 2016. Facebook (FB) has led the sector, with Activision Blizzard (ATVI) also playing a major role in the sector’s success. There have been negative contributions from LinkedIn (LNKD) and salesforce.com (CRM), but the combined quantum from these two stocks is not very large.

Amazon.com (AMZN) is mainly responsible for the strong showing by the consumer discretionary sector. Sony (SNE), the Priceline Group (PCLN), and Whirlpool (WHR) have made respectable contributions as well. Had it not been for negative contributions from Carnival (CCL), Harman International Industries (HAR), and Netflix (NFLX), among a few others, the sector would have done even better.

Telecom services and consumer staples have made equal contributions to the fund. Sprint (S)—the fund’s only telecom company—has propelled the sector, while the staples sector has gotten a leg up from Philip Morris International (PM), Tyson Foods (TSN), and Constellation Brands (STZ).

That said, the healthcare sector has erased a lot of the positive contributions from the above sectors, driven down by Alkermes (ALKS), Gilead Sciences (GILD), and Celgene (CELG).

Investor takeaways

It wouldn’t be incorrect to say that the fund managers’ picks from the consumer discretionary space have been very good. However, the recurring presence of negative contributors in all sectors has held the fund back so far in 2016. The fund’s short-term performance has been quite good, but it remains to be seen whether this performance can extend to the medium and long terms as well.

In the next article, we’ll take a look at the Vanguard Growth Index Fund Investor Shares (VIGRX).

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