What’s Causing the MFS Growth Fund’s Performance to Fall?


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

Performance evaluation: MFEGX

The MFS Growth Fund Class A (MFEGX) has seen its performance decline from our previous review three months ago. Although it remains an above average YTD (year-to-date) performer among the 12 funds we’ve chosen for this review, MFEGX has slipped from the top spot in the one-year period and is now not even in the top three. We’ve graphed below the fund’s 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 this performance YTD in 2016.

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Contribution to returns

The tech sector has emerged as the top sectoral YTD contributor to MFEGX. Facebook (FB) has done most of the heavy lifting for the sector but has had help from NVIDIA (NVDA) and Adobe Systems (ADBE), among others. Meanwhile, LinkedIn (LNKD) has emerged as a sizable negative contributor.

The consumer discretionary sector has followed the tech sector in terms of positive YTD contributions. Amazon.com (AMZN) has led the sector up with help from Ross Stores (ROST) and Comcast (CMCSA). However, Netflix (NFLX) and Nike (NKE) have dragged on the sector. Real estate and materials tail discretionary in terms of positive contributions. American Tower (AMT) and Vulcan Materials (VMC) have benefitted these respective sectors.

The healthcare sector has been the sole negative contributor so far this year. Alexion Pharmaceuticals (ALXN) and Allergan (AGN) have pulled the sector down, along with stocks like Regeneron Pharmaceuticals (REGN). However, Danaher (DHR), Thermo Fisher Scientific (TMO), and Medtronic (MDT) have been able to reduce some of the drag.

Investor takeaways

MFEGX has emerged as an above-average performer so far in 2016. Although only one sector has dragged on its performance, the returns from other sectors (except consumer discretionary) have been quite disappointing. The tech sector has been the biggest positive contributor, with its total contribution relatively muted. The presence of sizable detractors in all sectors has been the key reason for the fund’s poor performance in the past three months. But MFEGX has seen better days in the past, and so it’ll be interesting to see if the fund management is able to turn things around.

In the next part, we’ll look at the JPMorgan Large Cap Growth Fund Class A (OLGAX).


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