Credit: Shutterstock photoThe $8.3 billion American Century Growth Fund ( TWCGX ) is feeling its oats. The fund was up 30.92% this year going into Thursday, thanks in part to gains by aerospace giant Boeing ( BA ), up 91% this year; video game provider Activision Blizzard ( ATVI ), up 80%; and robotic surgical systems maker Intuitive Surgical ( ISRG ), up 72%.
[ibd-display-video id=3037043 width=50 float=left autostart=true] The fund's gain is better than double its 12.37% three-year average annual gain. And it tops the 28.01% average this year by his large-cap growth rivals tracked by Morningstar Direct as well as the S&P 500's 22.04% gain.
Information technology and consumer staples were the fund's first and fifth largest sectors as of Nov. 30, with weightings of 41% and 9% respectively. That reflects the outlook expressed by managers Gregory Woodhams and Justin Brown, who noted in their Sept. 30 commentary that growth prospects appear strong in tech and that valuations in consumer staples are compelling.
Those factors matter to the managers because they seek to invest in companies whose fundamentals are strong and improving but whose share price performance does not fully reflect those traits.
Activision is one of the fund's tech holdings. So are Facebook ( FB ) and Applied Materials (AMAT). The latter two both happen to be members of the IBD 50 list of top-performing growth stocks. Facebook is also a member of Leaderboard - IBD's premium service that spotlights play-by-play moves of top stocks.
Trading around 178, Facebook shares are up 55% so far this year. IBD readers see that Facebook is in a buy range from a prior 175.59 flat-base buy point. Big volume during its Nov. 29 slide was a bad sign, but the stock is holding up so far. The number of daily active Facebook users has climbed above 1 billion. Facebook's growing mobile platform is pulling in the bulk of the company's total advertising revenue.
The managers like Activision because it's a video game publisher that they think should continue to benefit from an ongoing shift to online subscription models, away from reliance on console-based video games. The shift to a subscription model tends to boost a business's margins.
American Century research shows that capital spending by semiconductor companies is rising. Applied Materials is a semiconductor equipment provider that is seeing rapid growth due to increased demand for chips used in artificial intelligence and big data applications, Growth Fund's managers told shareholders.
IBD'S TAKE:Apple, Alphabet's Google, Microsoft and others are racing to develop artificial intelligence hardware and software. Bookmark IBD's AI page to follow the latest developments.
Consumer Goods
In consumer staples, the fund's managers noted that Dollar Tree (DLTR) is bucking the trend of weakness among brick-and-mortar retailers. Dollar Tree benefits from focusing on lower-income consumers, the managers said. And the company has boosted its results due to its acquisition of the Family Dollar chain.
Dollar Tree shares are up 41% so far this year. Earnings per share grew 10%, 37% and 40% the past three quarters.
Wal-Mart Stores' (WMT) earnings per share inched up a modest 2%, 1% and 2% the past three quarters. That reflects the competitive challenge faced by brick-and-mortar retailers in general as they compete with online retailers such as Amazon (AMZN) - which is also a holding of this American Century fund.
Wal-Mart sales rose 1%, 2% and 4% the past three stanzas. Yet Wal-Mart shares are up 43% so far this year. Why such bullishness by investors? In the third-quarter, reported last month, Wal-Mart's U.S. e-commerce sales jumped 50% and gross merchandise volume leapt 54%. The company appears to be learning how to compete online.
As IBD recently reported, Wal-Mart's 2016 acquisition of Jet.com has beefed up its online capabilities . And acquisitions in 2017 such as ModCloth, Bonobos, Moosejaw, are helping the megastore build its indie and fashion cred. Those enabled the firm to beat Q3 forecasts last month and give upbeat holiday-quarter guidance.
Wal-Mart also announced last month that it will start to sell Lord & Taylor's department store products on Walmart.com. That will broaden its assortment of products and fashionable apparel, IBD has reported.
American Century Growth appears poised to continue its run by aiming for leadership stocks. Seven of its 10 largest holdings as of Sept. 30 had IBD Composite Ratings in the 90s. So did two of its five top new buys. A third top new buy had a Comp Rating of 89. IBD's Composite Rating is scored on a scale of 1 to 99. Stocks poised to move higher often have a Comp Rating of 95 or higher.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
