As part of its fund selector analysis on US equities, Morningstar has identified which funds to watch based on their assets under management.
Long-tenured managers
The Legg Mason ClearBridge US Aggressive Growth Fund holds a Morningstar analyst rating of Silver and is run by two highly experienced managers, Evan Bauman and Richard Freeman. Freeman is among the industry’s longest-tenured managers and has been at the helm since 1983. The strategy invests in companies with high growth rates the managers believe can be sustainable over the long term.
They look for secular growth businesses with high barriers to entry, competitive advantages, innovation, low leverage and attractive valuations. They take a long-term approach when investing and pay very little attention to the index, so sector and stock weightings often differ from those of the benchmark.
The approach leads to a high concentration in the top 10 holdings, which tend to account for over 50% of the overall portfolio’s equity assets. Such an investment approach is not without risks but investors who share the managers’ long-term perspective have been well served.
Downside protection
The MFS Meridian US Value Fund has a Morningstar analyst rating of Silver and has been managed by Steven Gorham since 2002. Gorham is an experienced investor who benefits from the support of co-manager Nevin Chitkara, appointed to the role in 2006.
The managers have a large pool of experienced analysts at their disposal to carry out an investment process that focuses on identifying high-quality firms that exhibit sustainable and superior returns on equity and free cashflow. The managers like companies with solid balance sheets and durable franchises. They take a long-term view with their holdings and often hold them for a decade or more, as evidenced by the low turnover rate. The strategy has had an excellent long-term track record since Gorham took charge.
The managers’ focus on downside protection has enabled the fund to hold up better in down markets than most of its peers but this does mean it will not participate as much in rallies.
Catalysts for growth
The Silver-rated Robeco BP US Large Cap Equities Fund is run by Mark Donovan and David Pyle, who boast over two decades of experience in the US equity market. They are supported by a well-resourced, stable and experienced analyst team. They use a bottom-up approach that combines quantitative and qualitative analyses to identify companies/sectors where they believe catalysts for growth exist.
The approach has resulted in concentrations in some areas, namely technology, healthcare and financials, which accounted for over 45% of the overall assets as the end of November 2016. The long-term results are solid, an outcome achieved with lower volatility.
Seasoned investor
The JPM US Value Fund holds a Morningstar analyst rating of Bronze and has been run by Jonathan Simon since its 2000 inception. He is a seasoned investor and is supported on this offering by Lawrence Playford and Gloria Fu, who came on board in 2006. The manager aims to add value by investing in companies with high barriers to entry, low cyclicality, and management focused on increasing intrinsic value.
The strategy has a mid-cap bias and the portfolio has historically had an overweight to those names compared with peers. Financials and consumer cyclicals companies have been favoured in recent years, and, combined, the sectors represent more than half of the holdings by assets, a stake well above most of its peers. The strategy has generated good results over the long term.
