The portfolio has a high degree of sector concentration, with nearly 47% in
information technology and another 30% in healthcare. The balance is split
between consumer discretionary and financial services.
Make no mistake, this is a high-growth portfolio. Valuation levels are
extreme when compared with the broader U.S. equity market. The fund’s
price/earnings ratio recently was recently shown at more than 55 times
earnings, compared with a P/E of about 18 for the S&P 500. The
price-to-book value ratio is at more than 12 compared with a P/B of 3 for
Valuations are undeniably high, but then so too is earnings growth. The
underlying portfolio has been able to grow earnings at a pace that is more
than double that of the broader equity markets.
The manager is very active, with the fund posting a 5-year average
portfolio turnover of 300%. This has added approximately 27 basis points to
the total cost of owning the fund, which shows an MER of 2.43%.
In return, though, performance numbers have been stellar, particularly in
the short-term. The fund grew 32.4% in 2017, more than doubling the 13.8%
rise in the S&P 500 in Canadian dollar terms. Longer-term numbers are
still above average, but more in line with the peer group.
Like its global counterpart, this fund wins big, but also loses big,
boasting one of the larger upside capture ratios as well as one of the
biggest downside capture ratios. This is a volatile fund, with a standard
deviation more than 50% higher than the benchmark. This volatility has hurt
the fund’s risk-adjusted returns, as it trails both the index and peer
I like this fund for the long-term, but I am not sure it is appropriate
now, given its overall valuation levels and concentrated portfolio.
However, it would be a solid pick after a market selloff and would be
expected to outperform both its peer group and the broader equity market.
Dynamic Power American Growth Class
Mid Cap Growth
Noah Blackstein since March 2002
DYN004 (front-end load)
Dave Paterson, CFA, is the Director of Research, Investment Funds for
D.A. Paterson & Associates Inc., a consulting firm specializing in providing research and due
diligence on a variety of investment products. He is also the publisher
Dave Paterson’s Top Funds Report,
offering regular commentary and in-depth analysis of Canada’s top
investment funds. He uses a unique analytical approach to identify
funds with strong, risk-adjusted returns, and regularly publishes his
insights and analyses in Fund Library.
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only and is not intended as personalized investment advice.