Trophy Funds

SEPTEMBER 2017

Featured content

What’s your style? Find out which mutual fund matches you Page 5 Hot Mutual Fund Sectors: What’s Driving Their Success?

become Wall Street darlings, and which ones end up on the black list. Tech still tops The hottest sector, not surpris- ingly, has been technology. Led by the FANG stocks — Face- book (FB), Amazon (AMZN), Netflix (NFLX) and Google parent Alphabet (GOOGL) — the sector has been firing on all cylinders. Indeed, those four stocks alone are up 20% to 47% through the end of July. The tech sector as a whole is up 21% this year. Fidelity Advisor Technology (FATIX) is the top fund in this category. It won an IBD 2017 Best Mutual Fund Award for having beaten the S&P 500 over the past one-, three-, five- and 10-year periods through the end of 2016. The $1.6 billion fund advances. More specifically, Chai picks “secular growth and compounding com- panies that are not priced for their long growth potential, cyclical companies that are priced below their cash flow genera- tion through a cycle and when cycles are at or close to a trough with improvement in sight, as well as special turnaround stories.” He believes there ar m ny opportuni- ties left in th t ch sect r. “AI (artificial inte l gence), EV (electric vehicles), new user interfaces and new mobile consumer applications such as AR (augmented real- ity) are all in very early days, while other trends like cloud computing, SAAS (soft- ware as a service) and e-commerce con- tinue to be in the sweet spot of growth.” Chai also added that “While valuation has come up, we are not approaching prior peak levels yet.” Health holds strong Health care has been another big winn r this year, despite j tters caused by t e Trump administration concern- ing ObamaCare and drug pricin . The sector is up 15% year to date and has returned an average of 14.6% and 16.5% for the past three and five years. “Health care is odd and a lot of people think of it as defensive, when it’s not really defensive, it’s just not cor- related,” said Teresa McRoberts, senior Hot mutual fund sectors What’s driving their success?

By Marie Beerens P assive investing based on broad stock indexes may be gaining popu- larity among investors, but several sectors and top funds this year have rewarded inves- tors above and beyond market averages. Trophy Funds looked at what drove performance of these top sectors and which funds stood out as the best among their peers in terms of long-term perfor- mance. Just as with everything else in the market, sectors can rotate in or out of favor on a monthly, weekly and sometimes even daily basis. Economic and geopolitical expectations, among many other factors, affect investors’ psyche and their trading behavior. This in turn determines which sectors Fidelity Advisor Technology (FATIX) is the top fund in this category. It won an IBD 2017 Best Mutual Fund Award for having beaten the S&P 500 over the past one-, three-, five- and 10-year peri- ods through the end of 2016. The $1.6 billion fund is up 32.8% this year and sports average five- and 10-year returns of 18.5% and 11.76%, respectively. Its top holdings include Apple (AAPL), Facebook, Tesla (TSLA) and Alphabet, totaling a whopping 31% of the fund’s assets. Electric vehicle maker Tesla skyrocketed over 70% this year. Developer of computer-aided design software Autodesk (ADSK), Chinese online marketplace operator Alibaba (BABA) and vide gam publi her Electronic Art (EA) also co tribute with returns of 46%, 79% and 48%, respectively. “Auto obil manufacturers was the group with the largest positive impact on the relative result,” said the fund’s manager, Charlie Chai. “Positioning in home entertai ment software and a non-index allocati to internet and di- rect marketing retail also bolstered rela- tive performance.” The fund invests in companies that will benefit significantly from technological July. The tech sector as a whole is up 21% this year.

By Marie Beerens P assive investing based on broad stock indexes may be gaining popularity among in- vestors, but several sectors and top funds this year have rewarded inves- tors above and beyond market averages. Trophy Funds looked at what drove performance of these top sectors and which funds stood out as the best among their peers in terms of long- term performance. Just as with everything else in the market, sectors can rotate in or out of favor on a monthly, weekly and some- times even daily basis. Economic and geopolitical expectations, among many other factors, affect investors’ psyche and their trading behavior. This in turn determines which sectors become Wall Street darlings, and which ones end up on the black list. Tech still tops The hottest sector, not surpris- ingly, has been technology. Led by the FANG stocks, Facebook (FB), Ama- zon (AMZN), Netflix (NFLX) and Google parent Alphabet (GOOGL) — the sector has been firing on all cyl- inders. Indeed, those four stocks alone are up 20% to 47% through the end of

Defer taxes How to build a portfolio through your IRA Page 7

Researching funds There are risks, so be prepared Page 14 Finding a financial advisor What you should look for Page 9

The long game Fund manager favors sustainable growth Page 15

PRINTED COPY FOR PERSONAL READING ONLY. NOT FOR DISTRIBUTION

Bears ahead Six funds that weathered last storm Page 17

Continues on Pg. 2

1

SEPTEMBER 2017

Continued from Pg. 1

Hot sectors As of 8/23/2017 Hot sectors As of 8/23/2017 Technology Technology

.

“ Health care is odd and a lot of people think of it as defensive, when it’s not really defensive; it’s just not correlated. ” people think of it as defensive, when it’s not really defensive; it’s just not correlated,” said Teresa McRoberts, senior vice president and manager of Alger Health Sciences (AHSAX). “And what I mean by that is some- times it does well when the economy is doing well, and sometimes it does Infrastructure notches big gains Infrastructure has been the third- best sector, up 14% year to date. Fi- delity Investments’ sector strategist Denise Chisholm says that the sector is “aligned for the potential snapback in relative earnings growth coupled with some multiple appreciation.” Virtus Duff & Phelps Global In- frastructure (PGUAX) invests in four main areas: utilities, communication, transportation and energy pipelines. The fund’s co-manager, Connie Lu- ecke, looks for consistency of returns that come from long-term contracts and heavy regulation. “The revenue and cash flow visibility is quite high,” Luecke said. “ Health care is odd and a lot of people think of it as defensive, when it’s not really defensive; it’s just not correlated. ” new mobile consumer applications such as AR (augmented reality) are all in very early days, while other trends like cloud computing, SAAS (software as a service) and e-com- merce continue to be in the sw et spot of growth.” Chai also added that “While valua- tion has om up, w are not ap- proaching prior peak levels yet.” Health holds strong Health care has been another bi winne t is year, despite jitters c us d by the Trump administration concerning ObamaCare and drug pricing. The sector is up 15% y ar to date and has returned an average of 14.6% and 16.5% for the past three and five years. “Health care is odd a d a lot of people think of it as defensive, when it’s not really defensive; it’s just not correlated,” said Teresa McRoberts, senior vice president and manager of Alger Health Sciences (AHSAX). “And what I mean by that is some- times it does well when the economy is doing well, and sometimes it does e s dd as defensive, when it’s not ( o w a r i e merce c ntinue to be in the t spot g . hai also add h h le - ha , w p p t.” Health h lds strong er h s , sp tt e t r p g a e ru pricing. .6% d . s. “Health c e, when it’s not really defensive; it’s just not , , d n al e AHSAX). - , li ti n of Tribune Online ti t new mobile consumer applications such as AR (augmented reality) are all in very early days, while other trends like cloud computing, SAAS (software as a service) and e-com- merce continue to be in the sweet spot of growth.” Chai also added that “While valua- tion has come up, we are not ap- proaching prior peak levels yet.” Health holds strong Health care has been another big winner this year, despite jitters caused by the Trump administration concerning ObamaCare and drug pricing. The sector is up 15% year to date and has returned an average of 14.6% and 16.5% for the past three and five years. “Health care is odd and a lot of Align Technology (ALGN), Illu- mina (ILMN) and Abiomed (ABMD) were also strong contributors, return- ing 78%, 52% and 33%, respectively, this year. Align makes clear braces for teeth, Illumina is a leader in genomic sequencing, and Abiomed develops devices to help the heart pump. , d i e oud c m , S

is up 32.8% this year and sports average five- and 10-year returns of 18.5% and 11.76%, respectively. Its top holdings include Apple (AAPL), Facebook, Tesla (TSLA) and Alphabet, totaling a whopping 31% of the fund’s assets. Electric vehicle maker Tesla skyrocketed over 70% this year. Developer of computer-aided design software Autodesk (ADSK), Chinese on- line marketplace operator Alibaba (BABA) and video game publisher Electronic Arts (EA) also contrib- uted with returns of 46%, 79% and 48%, respectively. “Automobile manufacturers was the group with the largest positive impact on the relative result,” said the fund’s manager, Charlie Chai. “Positioning in home entertainment software and a non-index allocation to internet and direct marketing retail also bolstered relative performance.” The fund invests in companies that will benefit significantly from technological advances. More spe- cifically, Chai picks “secular growth and compounding companies that are not priced for their long growth potential, cyclical companies that are priced below their cash flow genera- tion through a cycle and when cycles are at or close to a trough with im- provement in sight, as well as special turnaround stories.” He believes there are many oppor- tunities left in the tech sector. “AI (artificial intelligence), EV (electric vehicles), new user interfaces and vice president and manager of Alger Health Sciences (AHSAX). “And what I mean by that is sometimes it does well when the economy is doing well, and sometimes it does poorly when the economy is doing poorly.” She points out that the sector has its own set of fundamentals: “It’s not about consumer confidence or wheth- er the GDP is strong. It’s really about what’s going on in Washington.” Part of this year’s strong perfor- mance is a recovery from the many headlines that hit the sector last year, notes McRoberts. Another reason is that people have become less concerned about Wash- ington as a threat. “It seems that Washington is not functioning as well as people thought in terms of passing any sort of legislation,” she said. The $144 million AHSAX is up 26.76% i 2017, and with its 10.42% average 10-y ar return it is the best amo g its peers. It doesn’t c me cheap, though, wit an expense fee of 1.41% and a l ad f 5.25%. The fund invests about 45% in bio- tech, 16% in health care equipment nd supplies, 9% in pharm and 9% in h alth care providers and services. The biotech sector performs well when there are a lot of new products, which has been the case this year, says McRoberts. Vertex Pharmaceuticals (VRTX) showed some positive data about a new product for cystic fibrosis and its stock has more than doubled through early August. Continued from Pg. 1 is up 32.8% this year and sports average five- and 10-year returns of 18.5% and 11.76%, respectively. Its top holdings include Apple (AAPL), Facebook, Tesla (TSLA) and Alphabet, totaling a whopping 31% of the fund’s assets. Electric vehicle maker Tesla skyrocketed over 70% thi year. Developer of computer-aided design software Autodesk (ADSK), Chinese on- li e marketplace operator Alibab (BABA) and video game publish r Electronic Arts (EA) also contrib- uted with returns of 46%, 79% and 48%, respectively. “Automobile manufacturers was the group with the largest positive impact on the relative result,” said the fund’s manager, Charlie Chai. “Positioning in home entertainment software and a non-index allocation to internet and direct marketing retail also bolstered relative performance.” The fund invests in companies that will benefit significantly from technological advances. More spe- cifically, Chai picks “secular growth and compounding companies that are not priced for their long growth potential, cyclical companies that are priced below their cash flow genera- tion through a cycle and wh n cycles are at or close to a trough with im- provement in sight, as well as special turnaroun stories.” He believes there are many oppor- tunities left in the tech sector. “AI (artificial intelligence), EV (electric vehicles), new us r interfaces and . . , . o i g i e (AA , book, T s A) and Alphabet, totaling a whopping 31% f f ’ assets. E ic vehicle make e over 70% thi . l er of computer-aide e i n ftw s , i es n e i Electronic Arts (EA) also contrib- e , , . m group with the largest positive impa , ’ na , r e . P si n g m m n- n dire . d i e t significant o techn g cal va s. cifically, C i ng f h ng p i , y a a e a r ed t - n are at or close to u with im , a ou tories. e believes th many p tu t left in the tech secto . I , vehicles), n a e d TM l tt i t l t t li f t l i Sun, rla d enti l nd t aj

YTD Returns

23.71% 23.71%

Health

16.62 15.24 5

YTD Returns

Infrastructure Technology

23.71%

Utilities 14.53 Consumer Cyclical 7.41 Source: Morningstar Health 16.62 Infrastructure 15.24 : in sta

poorly when the economy is doing poorly.” She points out that the sector has its own set of fundamentals: “It’s not about consumer confidence or whether the GDP is strong. It’s re- ally about what’s going on in Wash- ington.” Part of this year’s strong perfor- mance is a recovery from the many headlines that hit the sector last year, notes McRoberts. Another reason is that people have become less concerned about Washington as a threat. “It seems that Washington is not functioning as well as people thought in terms of passing any sort of legislation,” she said. The $144 million AHSAX is up 26.76% in 2017, and with its 10.42% average 10-year return it is the best among its peers. It doesn’t come cheap, though, with an expense fee of 1.41% and a load of 5.25%. The fund invests about 45% in bio- tech, 16% in health care equipment and supplies, 9% in pharma and 9% As a result, the fund focuses mostly on owners and operators, while stay- ing away from companies with variable revenue. A contributor to the fund’s performance is U.S. rail operator CSX (CSX), which benefited from a restruc- turing story and is up 41%. The fund also holds 43% in interna- tional equities. Among those, Europe- an airports such as Aeroports de Paris (ADP) and Flughafen Zuerich (FHZN) so red 42% and 31%, respectively, on the back of a global economic recovery. The $120 million PGUAX is up 15.23% year to date and an average 8.61% over the past five years. It carries a fee of 1.3 % and a load of 5.75%. Other strong sec o s this year are utili- ties, consumer cyclicals, industrials and financials. Among thos s ctors, two funds are IBD’s 2017 Best Mutual Fund Award winners: Fidelity Select Air Trans- portation (FSAIX) and RMB Mendon Financial Services (RMBKX). poorly when the economy is doing poorly.” She points out that he sector has its o n set of fund m ntals: “It’s not about consumer confidence or whether the GDP is strong. It’s re- ally about what’s going on in Wash- ington.” Part of this year’s strong perfor- mance is a recovery from the many headlines that hit the sector last year, notes McRoberts. Another reason is that people have become less concerned about Washington as a threat. “It seems that Washington is not functioning as well as people thought in terms of passing any sort of legislation,” she said. The $144 million AHSAX is up 26.76% in 2017, and with its 10.42% average 10-year return it is the best among its peers. It doesn’t come cheap, though, with an expense fee of 1.41% and a load of 5.25%. The fund invests about 45% in bio- tech, 16% in health care equipment and supplies, 9% in pharma nd 9% 14.53 Consumer Cyclical 7.41 ource: Morningstar . h u own set of fundamentals: “It’s . ’ ally about what’s going on in Wash- ing . y ’s s o p ecovery from the man dl n at h t t s , t . Another reason t v a n a h . t e a p t o assing any so , . The l H is 6. i 7, d t . averag 10-year re u n it is he b peers. It doesn’t , , s . . . u es abou 4 n tech, e s p , on o ll iti T i f ti t ’ i il li t li l ; e o i lie with r t t it u Utilities

PRINTED COPY FOR PERSONAL READING ONLY. NOT FOR DISTRIBUTION

Continues on Pg. 3

The Trophy Funds TM newsletter is a monthly publication of Tribune Online Content, publisher of the Los Angeles Times, Chicago Tribune, Baltimore Sun, Orlando Sentinel and other major U.S. newspapers. It is published at a charge of $7.99 per month, billed quarterly. Note: Information contained herein is not and should not be construed as an offer, solicitation, i i lti It i li t f t ill t l t : I f ti t i i i t l t t ff li it ti

or recommendation to buy or sell securities. The information has been obtained from sources that Investor’s Business Daily believes to be reliable; however no guarantee is made or implied with respect to its accuracy, timeliness, or completeness. Authors may own the securities they discuss. The information and content are subject to change without notice. Continues on Pg. 3 t i f t t I t i ti li l t t t iti t i i f ti t t j t t it t oti

(#S050364) Copyright 2017 by Investor’s Business Daily, Inc. Excerpted and adapted with permission. To subscribe to Investor’s Business Daily, please call (800) 831-2525 or visit us online at Investors.com. For additional information about reprints or permissions to use Investor’s Business Daily content, please visit IBDreprints.com or contact PARS International Corp. at (212) 221-9595. 2 The Trophy Funds TM newsletter is a monthly publication of Tribune Online Content, publisher of the Los Angeles Times, Chicago Tribune, Baltimore Sun, Orlando Sentinel and other major U.S. newspapers. It is published or recommendation to buy or sell securities. The information has been obtained from sources that Investor’s Business Daily believes to be reliable; however no guarantee is made or implied with respect to its accuracy,

This article reprint, originally published by Tribune Online Content/Trophy Funds on September 30, 2017, is considered sales literature for the Alger funds mentioned only and not for any other products shown. Please note that Trophy Funds is an independent publication and the performance and ratings cited in the article do not represent the experience of any individual investor. For the period ending September 30, 2017, the Alger Health Sciences Fund (the “Fund”) returned the following:

Average Annual Total Returns (%) (as of 9/30/17) YTD

1 Year

3 Years

5 Years

10 Years

Since Inception

Class A (Incepted 5/1/02) Without Sales Charge

34.69 27.62 35.15

37.91 30.65 38.48

12.08 10.08

16.68 15.42

10.55

12.37 11.98 6.80

With Sales Charge

9.95

Class Z (Incepted 5/28/15)

S&P 500 Index

14.24

18.61

10.81

14.22

7.44 (Since 05/01/2002) 7.79 (Since 05/28/2015) 9.93

(Since 05/01/2002) 9.14 (Since 05/28/2015) 5.22

Russell 3000 Health Care Index

21.20

16.08

10.87

17.46

11.41

TotalAnnual Operating Expenses by Class (Prospectus Dated 2/28/17) Without Waiver: A: 1.41% With Waiver: —

Z: 1.16% 0.99%

Fred Alger Management, Inc. has contractually agreed to reimburse Fund expenses (excluding interest, taxes, brokerage, and extraordinary expenses) to the extent necessary to limit the total annual Fund operating expenses of the Class Z to 0.99%, of the class’ average daily net assets. This expense reimbursement cannot be terminated. Fred Alger Management, Inc. may recoup reimbursed expenses during the one-year term of the expense reimbursement contract if the expense ratio falls below the stated limitation at the time of the reimbursement. Please see the prospectus for more details on contractual waivers. Risk Disclosures: IInvesting in the stock market involves gains and losses and may not be suitable for all investors. Growth stocks tend to be more volatile than other stocks as the prices of growth stocks tend to be higher in relation to their companies’ earnings and may be more sensitive to market, political, and economic developments. Investing in companies of small capitalizations involves the risk that smaller, newer issuers may have limited product lines or financial resources, or lack of management depth. Foreign investing involves special risks including currency risk and risks related to political, social, or economic conditions. The strategy can leverage, that is, borrow money to buy addi- tional securities. By borrowing money, the strategy has the potential to increase its returns if the increase in the value of the securities purchased exceeds the cost of borrowing, including interest paid on the money borrowed. The strategy concentrates its investments in the health sciences sector, the value of the strategy’s shares may be more volatile than similar strategies that do not have concentrated investments. Furthermore, because many of industries in the health sciences sector are subject to substantial government regulations, changes in applicable regulations could adversely affect companies in those industries. In addition, the comparative rapidity of product development and technolog- ical advancements in many areas of the sector may be reflected in greater volatility of the stock of companies operating in those areas. The strategy may invest in private equity. The sale of private equity investments may be limited or prohibited by contract or law. Private equity investments are generally fair valued as they are not traded frequently. The strategy may be required to hold such positions for several years, if not longer, regardless of valuation, which may cause the strategy to be less liquid. There are additional risks when investing in an active investment strategy, such as increased short term trading, additional transaction costs and potentially increased taxes that a shareholder may pay, which can lower the actual return on an investment. Investors should not consider references to individual securities as an endorsement or recommendation to purchase or sell such security. Transactions in such securities may be made that seemingly contradict the references to them for a variety of reasons, including, but not limited to, liquidity to meet redemptions or overall portfolio rebalancing. Holdings are subject to change. As of September 30, 2017, the securities mentioned in this reprint represented the following as a percent of Alger’s assets under management: Vertex Pharmaceuticals Inc., 1.19%; Align Technology Inc., 0.11 %; Illumina, 0.51 %; and Abiomed Inc., 0.21 %. Before investing, carefully consider the Fund’s investment objective, risks, charges, and expenses. For a prospectus and summary prospectus containing this and other information, or for the Fund’s most recent month-end perfor- mance data, visit www.alger.com, call (800) 992-3863, or consult your financial advisor. Read the prospectus and summary prospectus carefully before investing. Distributor: Fred Alger & Company, Incorporated, Member NYSE Euronext, SIPC. NOT FDIC INSURED. NOT BANK GUARANTEED. MAY LOSE VALUE. The performance data quoted represents past performance, which is not an indication or a guarantee of future results. Investment return and prin- cipal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. Performance figures assume all distributions are reinvested. Returns with sales charges reflect a maximum front-end sales charge on Class A Shares of 5.25%. For performance current to the most recent month end, visit www. alger.com or call 800.992.3863. Only periods greater than 12months are annualized. Asignificant amount of the 2016 performance shown in the table above was caused by the planned acquisition of a private equity investment held in the fund. It is unlikely that a similar contribution to performance will reoccur in 2017.

PRINTED COPY FOR PERSONAL READING ONLY. NOT FOR DISTRIBUTION

Fred Alger & Company, Incorporated 360 Park Avenue South, New York, NY 10010 / 800.992.3863 / www.alger.com

TFTMCRRPT-1017

Made with FlippingBook flipbook maker