Fund of the week: Buy into America’s downgrade
The recent downturn in the financial markets is a great time to pick up some bargain shares. And this undervalued fund focusing on North American stocks has produced some impressive returns over the years.
The decision by credit ratings agency Standard & Poor's to downgrade the US government may not have been solely responsible for the recent stockmarket tumble, but it didn't help. It's also not great for the confidence of US consumers, or the American economy. But for some, the stock slide has created a huge buying opportunity. Carl Delfield, editor of the Investment U newsletter, notes that America is still the world's largest manufacturer, the biggest recipient of foreign direct investment, and remains far more productive per capita than China.
One fund well placed to take advantage of any uptick is the Axa Framlington American Growth Fund. During the last one, as well as three and five years, manager Stephen Kelly has returned 11.7%, 16.73% and 43.74% respectively. Kelly, who has been running the fund since 1997, focuses on Canadian, Mexican and US firms with a bias towards well-established technology firms, such as Apple and IBM. The fund is down 4.86% year-to-date but now could be a good time to buy.
Kelly admits that given "the current volatile nature of the market, strong results haven't automatically resulted in strong stock prices", but believes the good profits-reporting season "bodes well for the future". John Husselbee, CEO and fund manager at North Investment Partners, agrees. "Corporate earnings are there, firms are profitable, so they have the margins and the cash." Husselbee is a fan of the fund, "as rebuilding technology is an obvious place for industries to spend their money in". The total expense ratio is 1.57%.
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Axa Framlington American Growthtop ten holdings
| Apple | 4.3 |
| IBM | 2.1 |
| Oracle Corp. | 2.0 |
| Visa Class A | 1.7 |
| National Oilwell Varco | 1.6 |
| Directv Group Inc. | 1.6 |
| Polo Ralph Lauren Corp. | 1.5 |
| LKQ | 1.5 |
| Equinix | 1.5 |
| Netlogic Microsystems | 1.5 |
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