The Ave Maria Growth Fund Has Been Quite Sturdy In 2016

| About: Ave Maria (AVEGX)

Summary

The Ave Maria Growth Fund is the top fund in the Morningstar Mid-Cap Category based on performance.

The fund has a favorable weight advantage with regards to giant-cap and large-cap stocks.

The fund does not have a lot of exposure to the poorly performing financial services sector and above-average exposure to the sturdy industrials sector.

The Ave Maria Growth Fund (MUTF:AVEGX) is a mid-cap fund that has found a way to keep the bears at bay so far during a year which has been anything but bullish for investors. For the past few years, the Ave Maria Growth Fund has lagged behind the S&P 500 in upward and downward markets while outperforming its Morningstar category in two out of the prior four years.

Last year, the fund was slightly outpaced by the S&P 500 and its Morningstar category in terms of return. However, this fund has managed to incur far less damage than other similar funds in the Morningstar mid-cap category. The Ave Maria Growth Fund's performance can be seen in the graph below.

For one thing, the Ave Maria Growth Fund's downside risk is surely mitigated by its sizable advantage in terms of exposure to safer giant-cap equities. Furthermore, the fund also enjoys a deficit in terms of exposure to riskier small-cap stocks. These two advantages within this fund combine to create some sturdiness against the downside. This advantage can be seen in the graph below.

Size

% of Portfolio

Benchmark

Category Average

Giant

16.09

0.00

1.31

Large

31.35

30.31

20.65

Medium

50.09

64.22

60.68

Small

2.47

5.38

16.52

Micro

0.00

0.09

0.84

The Ave Maria Growth Fund may not be the best fund in terms of total outperformance of benchmarks in market upticks. It is worth noting that the Ave Maria Growth Fund has outperformed its Morningstar mid-cap growth category in terms of 3-year, 5-year and 10-year return ratios. However, the fund is strongly positioned against the downside in market downturns as it has a downside capture ratio that is very favorable. This can be seen in the graph below:

In addition, the fund has favorable sector weightings in sectors such as financial services and the energy. With an YTD return of -12.1%, the Financial Select Sector SPDR ETF (NYSEARCA:XLF) is the worst performing U.S. sector so far in 2016. As I write, the Financial Select Sector SPDR ETF is the worst performer on a day in which the Dow Jones dropped more than 300 points on the heels of a poor jobs report on Friday.

Yet, the Ave Maria Growth Fund is not nearly as exposed to the financial services sector in comparison to its benchmark. This can be seen in the table below:

Sector

% of Stocks

Benchmark

Category Average

Financial Services

2.96

5.51

9.62

In addition, the Ave Maria Growth Fund has a great deal of exposure to the industrial sector. Even though the Industrial Select Sector SPDR ETF (NYSEARCA:XLI) has lost -5.6% this year, it is still the third best performing U.S. sector this year.

Sector

% of Stocks

Benchmark

Category Average

Industrials

35.27

20.49

18.55

The fund's expense ratio is slightly higher than the median level in its fee level comparison group, yet the ratio is still slightly cheaper than the Morningstar category average. As of 5/1/15, the fund is 1.18%. While still pricey, it is worth noting that the fund's expense ratio has dropped 0.32% since 2012.

BOTTOM LINE

The Denver Broncos have reminded hardcore football fans such as myself that defense wins championships. Similarly, the Ave Maria Growth Fund is the top performing fund in Morningstar's mid-cap growth category thanks to its sturdiness in key areas. The Ave Maria Growth Fund is set up to hold its own in this bear market thanks to a lack of exposure in the financial sector and above-average exposure to the industrial sector.

Up to this point, the industrial sector has not had the level of damage of sectors such as consumer discretionary, healthcare and technology. Even though the fund is categorized in the mid-cap category, one cannot help note that the fund benefits defensively from its above-average portfolio weighting in the giant-cap category and below-average weighting in small-caps.

While the combined giant and large-cap weightings for the fund's benchmark and category average was 31% and 22%, the combined giant and large-cap weightings for the Ave Maria Growth Fund was 46%. Given this decided advantage, it is no surprise that this fund has succeeded due to its sturdiness.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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