Has This Unconventional Growth Fund Lost Its Mojo?

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Has This Unconventional Growth Fund Lost Its Mojo?

In six of the past seven full calendar years, the Primecap Odyssey Growth (POGRX) has lagged its benchmark, the S&P 500. We’re growing weary of waiting for a return to the fund’s fantastic outperformance of years past, but we’re not ditching it from the Kiplinger 25, the list of our favorite no-load mutual funds.

The fund isn’t an index-hugger, it’s clear, but therein lies its value. Because Odyssey Growth has an “unconventional collection of stocks” that hardly resemble the index, as the managers said in its recent annual report, the fund can help boost the overall diversification of your portfolio.

It has little exposure to the stocks of the huge companies known as the Magnificent Seven, for a start. The fund doesn’t hold Apple (AAPL). And the remaining six, including Microsoft (MSFT), Nvidia (NVDA) and Tesla (TSLA), made up just 9% of the fund’s assets at last report. For comparison, those six stocks make up a combined 24% share of the S&P 500.

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Another drag came from Odyssey Growth’s longstanding tilt toward healthcare stocks. Nearly 30% of the fund’s assets are invested in that sector – almost triple that of the S&P 500. But health stocks have trailed the broad-market index over each of the past six years.

Both factors contributed to the fund’s performance over the past 12 months. Odyssey Growth, up 19.9% – a spectacular return on an absolute basis – fell short of the 26.4% return in the S&P 500.

The five Odyssey Growth managers divide the fund’s assets and run a portion of the portfolio independently. But they all focus on growing companies priced at a discount that have a catalyst – a new product, say, or a restructuring – to drive prices higher. That process leads to a portfolio that’s different from the S&P 500 in other ways, too, such as valuation:

The fund’s stocks trade at an average price-to-earnings (P/E) ratio of 19 (based on year-ahead estimates), which is far lower than the S&P 500’s P/E of 24. Top holdings include Eli Lilly (LLY), Alphabet (GOOGL) and Raymond James Financial (RJF).

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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