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New members of the Dow Jones industrial average represent almost 15 per cent of the stock-weighted U.S. index. (RICHARD DREW/AP)
New members of the Dow Jones industrial average represent almost 15 per cent of the stock-weighted U.S. index. (RICHARD DREW/AP)


U.S. growth funds withstand market jitters Add to ...

What are we looking for?

The U.S. Federal Reserve surprised the markets in mid-September by delaying the decision to taper its financial stimulus. Which U.S. equity funds have weathered the past few months of uncertainty best?

The screen

We looked for the 15 best-performing U.S. equity funds traded in Canada for the three months to Aug. 31. U.S. dollar, duplicated, segregated and pooled funds were excluded.

What did we find?

Growth-focused funds came out on top.

The Dynamic Power American Growth fund was the runaway winner with gains of 15.5 per cent in the period.

“U.S. economic indicators, and especially global indicators, have been improving over the past few months,” said Noah Blackstein, a portfolio manager at Dynamic Funds who has been at the helm since 1998.

The Fed’s impending move to pull back on its “quantitative easing” program, and the market uncertainty that this has created, is unlikely to drive any strategic shifts in the way Mr. Blackstein invests.

Instead, he said, his fund started to take off when investors’ interest in dividend-paying stocks began to unwind. “There was such a bubble in income-producing stocks, such as utilities and real estate investment trusts in the U.S., that was sucking up all the capital,” he said. “When interest rates began going higher, and real rates [which strip out the effects of inflation] went positive, investors began to focus a little more on duration and growth stocks.”

The RBC Life Science & Technology posted the second-best return of 6.1 per cent in the period, although both funds had gains of more than 20 per cent in the 12 months to Aug. 31.

The RBC fund has a dual mandate that can tilt to either tech or health care. Right now, the weighting falls toward the booming biotechnology industry.

Senior portfolio manager Cameron Scrivens said he also spends some time thinking about broader U.S. trends, such as the Affordable Care Act, which could affect groups such as drug distributors and managed care organizations. Right now, he isn’t too worried about these factors.

Mr. Scrivens says he likes biotech companies that have a focus on “orphan drugs,” which are niche medicines that only a small population of patients need.

But he’s also keeping an eye on some social media and semiconductor companies. “It has been a long, lonely 10 years in technology, and we’re seeing some exciting new things now,” Mr. Scrivens said. The important thing is to avoid sectors that are not innovating, he said.

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U.S. equity funds, three months to Aug. 31, 2013

Fund 3-mo.
% rtn
(Aug. 31)
% rtn
(Aug. 31)
% rtn
(Aug. 31)
Dynamic Power American Growth 15.50% 21.00% 19.50%
RBC Life Science & Technology 6.10% 21.90% 14.40%
CIBC U.S. Equity 5.60% 19.90% 15.40%
CIBC Nasdaq Index A 5.00% 18.70% 19.60%
Fidelity U.S. Focused Stock-B 4.80% 26.10% 15.00%
Franklin Flex Cap Growth 4.80% 22.40% 12.10%
Scotia Nasdaq Index 4.70% 18.00% 19.20%
Sun Life MFS McLean Budden U.S. Growth 4.70% 25.50%
Desjardins American Equity Growth 4.60% 29.50% 15.60%
TD U.S. Blue Chip Equity 4.50% 25.20% 18.10%

Source: Lipper


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