Our domestic fund finished slightly ahead in July, as small- and mid-cap stocks held steady.

 

July

Year to Date

Since Inception (Annualized)

Inception Date: 11/1/2010

Motley Fool Great America Fund (TMFGX)

0.18%

9.75%

12.64%

Russell 2500 Growth Index*

1.12%

11.97%

13.64%

For a standardized list of performance for the Great America Fund, please click here. For fund holdings, please click here.

July was a quiet month for domestic small- and mid-cap stocks. The Great America Fund underperformed for the month with a gain of 0.18%, compared with a 1.12% gain for the Russell 2500 Growth Index. Year to date, the fund’s 9.75% return trails the benchmark’s gain of 11.97%.

The three best-performing stocks for the month were Align Technology (11.4%), KapStone Paper & Packaging (10.8%), and Proto Labs (9.9%). Align Technology is a medical-device company that makes the Invisalign clear aligners for straightening teeth. “We are on a mission to eliminate metal wires and brackets and replace them with digital scanning and plastic aligners,” CEO Joe Hogan recently said. The company’s result suggest that things are moving in that direction, with Q2 earnings revenue up 32%.

The fund’s three worst-performing stocks in July were Spirit Airlines (down 24.8%), Gentex (down 10.3%), and Under Armour (down 10.2%). Spirit’s shares have been pummeled in the aftermath of a Q2 report in which management laid out its concerns over aggressive fare discounting from competitors in several cities Spirit operates in. Airline price wars are great for consumers, but not so great for airline profitability.

We made only one portfolio change in July, trimming our position in Under Armour.

As Q2 earnings come to a close, we are optimistic about the business outlook for the rest of 2017, and we’re pretty happy with how most of our companies in the fund have done so far this year. On the other hand, it does seem less likely than it did six months ago that there will be meaningful corporate-tax changes in the United States. We had viewed the potential for such a change as a source of possible upside for some of our holdings, but it’s not a factor we’ve relied on for our investing decisions. We remain focused, as always, on the combination of business performance and reasonable valuations for our investment process.

The Great America Fund changed its benchmark from the Russell MidCap Index and the Russell 2000 Index to the Russell 2500 Growth Index on Feb. 28, 2017.

 

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