Invesco U.S. Companies Fund (AIM1743)
This Invesco offering has been around since 1999, under the Trimark banner.
After Invesco acquired the Trimark funds, it rebranded them under the
Invesco name, but this one, at least, is the same fund. It has reasonable
one-year performance, despite recent stock market weakness, with a 5.6%,
matching the category average of 5.1% to Oct. 31. Longer term, it excels,
with a top-quartile 5-year average annual compounded rate of return of
13.8%, outpacing the peer group’s 11.9% annual return.
While manager Jim Young uses a similar approach to other Invesco funds in
managing this one, he tends to have more of a growth tilt. At the end of
October, he was overweight technology, healthcare, and industrials, and
underweight consumer staples, consumer discretionary, communications
services, and energy.
As part of his investment process, Young looks for companies that have
distinct proprietary advantages, invest significantly to obtain a
competitive advantage, and demonstrate consistently strong management and
The portfolio is concentrated, holding just over 40 names, with the top 10
making up 40% of the fund’s holdings. Top holdings include semi-conductor
Mellanox Technologies Inc. (NASDAQ: MLNX), tech giant (and this week the world’s largest company by market cap)
Microsoft Corp. (NASDAQ: MSFT), medical device firm
Stryker Corp. (NYSE: SYK), semi-conductor company
Analog Devices Inc. (NASDAQ: ADI), and industrial products firm
Roper Technologies Inc. (NYSE: ROP).
At the end of October, the manager believed the market was fairly valued
relative to interest rates and inexpensive compared with other asset
classes. Within the fund the manager believes there is risk in some stocks
that have moved ahead too fast and now have valuations that appear
unwarranted, and says in a recent commentary, “Ultimately, there is a lot
of room for rotation into more modestly valued companies.”
Volatility for this fund has been well above average, which makes it much
less attractive on a risk-adjusted basis. My concern with this fund is that
as the markets begin focusing on fundamentals, performance will trail
because of its emphasis on growth names. If you have held this fund for
some time, you may now want to consider taking some profits off the table.
I continue to monitor it closely.
Change in Leadership at O’Shaughnessy Funds
Back in January, O’Shaughnessy Asset Management announced that market
veteran and founder Jim O’Shaughnessy was stepping aside as CEO of the
firm. Patrick O’Shaughnessy, Jim’s son, stepped into the role. Jim remains
with the firm as Chairman and Chief Investment Officer.
In the role of CEO, Patrick will oversee the day-to-day business of the
firm and will direct the firm’s initiatives in the areas of research,
portfolio management, investor education, and client relationships.
Given the systematic focus of the investment process, this change is
unlikely to have any impact on the investment management of the
O’Shaughnessy funds. The investment process continues to screen the stock
universe on factors that have historically been found in stocks that
outperform. These include valuation, market cap, momentum, and return on
invested capital, which includes dividends, share buybacks, and debt
repayments. Stocks are scored on these factors and then ranked from most
attractive to least attractive, with the portfolios being made up of the
most attractive. It’ll take at least a year before we know whether the
leadership change has any material effect on performance.
Of the RBC O’Shaughnessy offerings, the
RBC O'Shaughnessy U.S. Value Fund
remains my favourite, but I am also a fan of the
RBC O’Shaughnessy Canadian Equity Fund. I believe in the disciplined systematic process for the long-term, but
there may be periods where these may lag the broader markets. I’ll keep
monitoring these funds to assess any impact in the change of leadership.
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.