Fund in Focus: Dynamic Power American Growth Fund

Active growth focus delivers strong performance

Even after falling 5.7% in the past three months ending Oct. 31, Dynamic Power American Growth Fund managed to deliver first-quartile performance for the year, posting a 12-month return of 19.9%, well above the index and the peer group.

There is no real secret to what veteran fund manager Noah Blackstein does. While his management style is no secret, there are very few managers who do it better. He runs a very concentrated, growth-focused portfolio. He looks for companies that have the best growth prospects, strong earnings momentum, and a history of upside earnings surprises. At the end of October, the fund held only 25 stocks spread across five sectors. Mr. Blackstein’s mandate allows him to invest of companies of any size, but he tends to favour mid-cap and large-cap names. His approach is very active, with portfolio turnover approaching 200% per year.

Not surprisingly, technology is the largest exposure, making up over 40% of the fund. The individual names in the portfolio change frequently but will often include many “off-the-beaten-path” type of stocks. Next up is healthcare, which constitutes nearly 30% of the fund’s allocation. Again, most of the holdings are not exactly household names, including, for example, molecular diagnostics firm Exact Sciences Corp. and medical device maker Isulet Corp.. The rest of the portfolio is invested in consumer-focused stocks.

At the end of October, top holdings included medical device maker Insulet Corp. (NSD: PODD), software company Alteryx Inc. (NYSE: AYX), streaming video service Roku Inc. (NSD: ROKU), cloud-based communications firm RingCentral Inc. (NYSE: RNG), and sportswear retailer Lululemon Athletica Inc. (NSD: LULU).

Performance, particularly over the long-term, has been excellent, with the fund outperforming the index and the peer group by a substantial margin. But the ride has been anything but smooth. The fund’s volatility is substantially higher than the index and the peer group. Furthermore, the fund can experience some pretty dramatic drawdowns. For example, in 2008, it fell by more than 44%, and peak to trough during the financial crisis, it was down 50%.

While this has been an excellent performer over the long-term, I don’t believe it is well suited as a core holding. It is much too volatile for that. Still, if you have a very high risk tolerance and are looking to add some torque to your portfolio, this should be one of the funds at the top of your list for consideration.

Dynamic Power American Growth Fund
Fund company: Dynamic Funds
Fund type: U.S. Equity
FundGrade: B (October)
Style: Large-Cap Growth
Risk level: High
Load status: Optional
RRSP/RRIF suitability: Fair
Manager: Noah Blackstein since July 1998
MER: 3.82%
Fund code: DYN604 (Low-load units)
Minimum investment $500

Dave Paterson, CFA, is a money manager and an expert on investment fund research and due diligence on a variety of investment products.

Notes and Disclaimer

Commissions, trailing commissions, management fees and expenses all may be associated with fund investments. Please read the simplified prospectus before investing. Mutual funds are not guaranteed and are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. There can be no assurances that the fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in the fund will be returned to you. Fund values change frequently and past performance may not be repeated. No guarantee of performance is made or implied. This article is for information purposes only and is not intended as personalized investment advice.