The stock market is in a confirmed uptrend. But $41.5 billion T. Rowe Price Growth Stock (PRGFX) is still way off its late-2015 high (it’s down 10.36% this year going into Tuesday), like a lot of growth-oriented mutual funds. So what’s the fund doing to position itself for the future and to resume the outperformance charted by helmsman Joe Fath since he took the tiller a little more than two years ago?
After becoming manager in early 2014 and then reshaping the portfolio to reflect his strategy, Fath guided the fund to a 10.85% gain in 2015. That topped 96% of its large-cap growth rival mutual funds tracked by Morningstar Inc. Its peer group averaged a 3.60% gain. The S&P 500 edged up 1.38%.
It will be increasingly hard to find growth in 2016, Fath said in his year-end commentary. Durable growers will be crucial to good performance. And he wants to use market volatility to find good growers whose price gets knocked too low — relative to their long-term prospects.
Eight of his top-10 holdings as of Dec. 31 have strong Composite Ratings from IBD of 80 or higher.
He’s already seeing gains out of names like Ross Stores (ROST). The apparel, accessories, footwear and home-fashions discounter is up 5% since its Jan. 20 low. Trading around 56, shares on Tuesday rose through their 55.74 buy point ahead of the company’s after-the-close earnings report. Analysts were expecting a 7% gain for fiscal Q4.
After the close, Ross reported a 10% gain in fiscal Q4 earnings to 66 cents a share. That beat analyst expectations, though the company guided lower for fiscal Q1 sales and full-year earnings. Shares continued higher after hours Tuesday.
PayPal (PYPL), a top new buy of the fund, is up 5% this year and is up 22% from its Jan. 20 low. Trading near 39, the digital and mobile-payment provider’s shares were still in a buy range from an early entry at 38.62. A conventional buy point lies at 42.65.
The stock’s average daily volume is almost 11 million shares, more than enough to attract institutional sponsorship. Several funds with IBD’s 36-month Rating of A+, in addition to Growth Stock, own the stock.
Intuitive Surgical (ISRG) is up 12% from its Feb. 9 low of 502.01. The stock is up 3 for this year.
Trading around 568, shares are about 2% above their 556.84 cup-with-handle entry. Robotic procedures are gaining market share within the surgical field. The company is debt free.
Managed health-care provider UnitedHealth Group (UNH) is up about 1% so far this year, and it’s up 11% off its Jan. 14 low.
Trading around 121, it is about 4% below its 126.21 pivot point.
In stock market news on Tuesday, UnitedHealth and Qualcomm (QCOM) launched a program that offers financial incentives to workers for meeting specific walking goals and for wearing monitors that track their distance.
AutoZone (AZO) has been reinventing itself by serving more car repair shops. The No. 1 U.S. auto-parts retailer topped analysts’ consensus quarterly earnings expectations Tuesday with a solid same-store sales gain. It benefited from upbeat industry trends and higher margins.
AutoZone’s Q2 earnings per share revved up 14%. Net sales rose 5% to $2.26 billion, matching views. Same-store sales climbed 3.6% from a year earlier. Gross profit as a percentage of sales widened to 52.7% from 52.2% the prior year, driven by higher merchandise margins.
View more information: https://www.investors.com/etfs-and-funds/mutual-funds/ross-stores-autozone-help-position-a-top-mutual-fund-for-new-rally/