Primecap Odyssey Growth Has a Rough Year

The fund trailed the S&P by a wide margin, but over the long haul Primecap's managers have not disappointed shareholders.

POGRX ticker and Primecap logo
(Image credit: Primecap)

The managers at Primecap Oydssey Growth (POGRX) like to focus on what they do best – pick stocks – and they typically don't talk to reporters.

So once a year, when the fund's annual report comes out, we read every word. Over the past 12 months, Kiplinger 25 member Odyssey Growth gained 12.7%, which trailed the 24.7% gain in the S&P 500.

We're not worried. Short-term returns can be instructive and add some perspective, but long-term performance matters most.

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And over the long haul, Primecap's managers have not disappointed shareholders. The fund's 15-year annualized return, 11.3%, beat the S&P 500 by an average of 0.7 percentage point per year.

But 2021 was a win-some, lose-some year for the fund. Some of the fund's top 10 holdings generated market-beating returns. Shares in banking giant Morgan Stanley (MS), for instance, gained 42% over the past 12 months. Other top holdings jumped even higher: Eli Lilly (LLY) was up 59%; Alphabet (GOOGL), 54%; and Microsoft (MSFT), 45%.

Biotech Stocks Stumble

But the fund holds 15% of assets in biotech stocks – a chunk, relative to the 2% exposure in the S&P 500 – which pressured results.

Biotechnology was the worst-performing slice of the health industry over the past 12 months, thanks in part to drug-pricing concerns and regulatory issues.

Epizyme (EPZM) dropped 81% over the past 12 months after an "anemic" new drug launch, the Primecap managers reported. And FibroGen (FGEN) stumbled, too, losing 66% after clinical missteps and regulatory setbacks.

China proved to be a snag as well. The fund has a significant stake in Alibaba (BABA), the Amazon of China, and the stock slipped 43% over the past 12 months because of increased government scrutiny.

The fund's five managers divide and run a portion of the fund’s assets independently. But they all favor stocks in fast-growing firms with long-term growth potential that they think the market has underestimated. When they buy, they tend to hold. The fund's 7% turnover implies a typical holding period of more than a decade. They're patient and willing to wait for their investment thesis to play out. We'll wait with them.

Nellie S. Huang
Senior Associate Editor, Kiplinger's Personal Finance

Nellie joined Kiplinger in August 2011 after a seven-year stint in Hong Kong. There, she worked for the Wall Street Journal Asia, where as lifestyle editor, she launched and edited Scene Asia, an online guide to food, wine, entertainment and the arts in Asia. Prior to that, she was an editor at Weekend Journal, the Friday lifestyle section of the Wall Street Journal Asia. Kiplinger isn't Nellie's first foray into personal finance: She has also worked at SmartMoney (rising from fact-checker to senior writer), and she was a senior editor at Money.