A stable U.S. growth fund for the long run

Sun Life MFS U.S. Growth's experienced managers and consistent process suggest it will outperform over a full market cycle.

Achilleas Taxildaris 10 January, 2017 | 6:00PM
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Sun Life MFS U.S. Growth, managed by Sun Life subsidiary MFS Investment Management, is in skilled and seasoned hands. The managers try to identify firms with underestimated earnings and cash flow growth prospects for the next three to five years. Specifically, they look for firms with pricing power in large, untapped markets that can be sustained regardless of the economic environment. A firm's pricing power may stem from sources such as intellectual property and high barriers to entry. They pay little attention to short-term earnings; thus, the portfolio's price multiples tend to run higher than those of the Russell 1000 Growth Index. Instead, the managers hold firms that they believe are undervalued relative to their internal long-term outlook.

To find these firms, the managers leverage the fundamental research of MFS's deep analyst team. The analysts meet with company management and create cash flow models to rate stocks across industries. While co-managers Eric Fischman and Matthew Sabel rely on analysts' knowledge, they also dig into fundamentals to understand a firm's growth thesis before making an investment decision. The resulting portfolio contains 90 to 110 stocks with position sizes that reflect the managers' conviction in the holdings. Generally, they don't allow a single position to represent more than 5% of the fund's assets. While they remain cognisant of sector positioning relative to the benchmark, their stock selection ultimately determines the sector weightings.

This Silver-rated fund strongly emphasizes firms that possess pricing power through high barriers to entry and economies of scale, among other factors. With that, it's not surprising that more than 90% of its assets are in holdings with Morningstar Economic Moat Ratings--a measure of competitive advantages. In the managers' search for durable growth, they may own multiple firms that fit a common secular growth theme, helping to reduce stock-specific risk. For example, two of the fund's top 10 positions are payment technology firms  Visa (V) and  MasterCard (MA), both wide-moat stocks. The team thinks both will continue to benefit from the secular shift from cash-based to electronic transactions worldwide because their platforms and scale are difficult to replicate.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Altria Group Inc47.95 USD-0.38Rating
Biomarin Pharmaceutical Inc75.23 USD1.77Rating
Edwards Lifesciences Corp114.53 USD3.09Rating
Las Vegas Sands Corp39.84 USD-0.51Rating
Mastercard Inc A361.48 USD0.85Rating
Medtronic PLC122.39 USD1.38Rating
Microsoft Corp308.27 USD0.32Rating
Visa Inc Class A232.72 USD0.90Rating
Wynn Resorts Ltd91.22 USD0.46Rating

About Author

Achilleas Taxildaris

Achilleas Taxildaris  Achilleas Taxildaris is analyst for Manager Research and focuses on active strategies.

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