American Century Ultra: Ahead of its Peers

11/26/2018 5:00 am EST

Focus: FUNDS

Walter Frank

CIO, MONEYLETTER

American Century Ultra (TWCUX) is a new buy in our conservative portfolio; the fund was launched in 1981 and has amassed more than $12.5 billion in investors assets across its various classes, notes Walter Frank, mutual fund expert and editor of MoneyLetter.

American Century Ultra is unmistakably a large-cap growth fund that is oriented to quality and a longer-term investment horizon. Lead portfolio manager Keith Lee, who has headed the fund for ten years, is assisted by two co-managers and a team of analysts.

A number of the team have direct experience in the industries they cover, and there is substantial overlapping sector coverage among the members. That aids in sharing of ideas, stability of the execution process, and reduces reliance on key individuals.

The investment process uses fundamental analysis to identify companies producing attractive and sustainable earnings growth. The managers seek companies that are capable of compounding shareholder capital at high growth rates over time.

They also look to invest at key inflection points identified by improving fundamentals, market strength compared to peers, earnings quality, and attractive price valuation. In addition, they utilize a quantitative model that ranks stocks on factors such as earnings quality and acceleration. They analyze stocks over a five to ten year investment horizon.

Given its growth focus, this fund does tend to outperform when growing investing is in favor, and may lag the market in more value-oriented periods. This year, through November 1, the fund's total return of 12% far surpassed the S&P 500's 4.1% and also outpaced 92% of the Morningstar large growth category.

And even though it lags in some periods, its longer-term statistics are good, outpacing more than 75% of its peers in the trailing three, five and ten-year time frames. The minimum investment in the fund is $2,500.

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