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mutual funds

A Mutual Fund That Cleans Up With 22 Blue-Chip Stocks

Despite its concentrated portfolio, Polen Growth held up during the recent downturn.

Over the past year, Polen Growth (POLRX) has trounced the market and most other large-company growth funds. But aside from Alphabet (nee Google), Facebook and two biotech stocks, the fund holds mainstream blue chips such as Starbucks and Nike.

What have managers Daniel Davidowitz and Damon Ficklin done to separate Polen from the pack? For one thing, they’re choosy. At last report, they held only 22 stocks, compared with 145 for the average actively managed diversified U.S. stock fund. To even be considered, a firm must have a market value of at least $3 billion, little or no debt, and a high return on equity (a measure of profitability). Beyond that, the managers favor companies with strong balance sheets and “massive” competitive advantages. In the end, they build a portfolio with average estimated earnings growth of about 15%. Davidowitz points to holdings Visa and MasterCard—which, he says, have a duopoly in the credit card business—as prime examples.

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The managers’ focus on high-quality, steady growers, rather than on the market’s novas, means the fund generally doesn’t stand out when stocks are soaring. In 2013, for example, Polen lagged Standard & Poor’s 500-stock index’s 32.4% return by 10.2 percentage points. But the fund has shone during periods of weakness. During the May–August correction, it lost only 5.5%, compared with a loss of 11.9% for the S&P 500.

K1I-FUNDTRENDS_RANKINGS.indd
K1I-FUNDTRENDS_RANKINGS.indd

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@Rankings exclude share classes of this fund with different fee structures or higher minimum investments. rMaximum redemption fee. sFront-end load; redemption fee may apply.

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