Ian Salisbury states in his article “Growth, Not Value, Is Tops in Stocks” that growth stocks are outperforming value stocks (Salisbury 2009). He says that growth stocks are shares of companies with the strongest potential to generate revenue and earnings while value stocks are under appreciated (Salisbury 2009). The best way to test this hypothesis is to compare are large growth stock vs a large value stock and see which is preforming better in recent times. The two funds I will be comparing are JPMorgan Disciplined Equity (Large Growth) and American Funds American Mutual 529A LW (Value). Comparing the two will help further prove or dismiss Mr. Salisbury’s findings.
In order to compare JPMorgan Disciplined Equity and American Funds Mutual we must look at both funds financial data. This information will be pulled from each funds Morningstar.com profile and broken down from with data from the following tabs: Quote, Management, Portfolio, Performance, and Expense. The fund’s quote, management, and portfolio breakdowns will allow me to compare net value assets as well as total assets as well as each fund’s investment style. This will also provide information on who the most recent fund manager was, the funds asset allocation and a sector breakdown. The performance tabs will key in on whether the funds have experienced growth over the last 10 years during a recession and also each funds value in recovery. The portfolio section will break down valuable rations such as the price/prospective earnings, price/book, price/sales, price/cash flow, and dividend yield. The final section will be the expense breakdown. This will include each funds maximum sales fees (initial and deferred) 12b-1, management fees, and expense ratio. Taking all these factors into consideration will provide the information needed to prove which fund has performed better.
The current fund manager for JPMorgan Disciplined Equity is Raffaele Zingon and he has been in this position since 2002. He poses an M.B.A from New York University (JPMorgan Disciplined Equity Instl). American Funds Mutual’s fund manager is Joyce E Gordon and she has been in that position since 2006. JPMorgans Discipline Equity has a most current NAV of $22.45 (JPMorgan Disciplined Equity). American Fund Mutual has a current NAV of $36.19 (American Fund Mutual). Net asset value (NAV) is computed by subtracting the funds liabilities from the fund’s assets and dividing by the total outstanding shares. This represents the total price at which a buyer will purchase a share of the funds stock. The higher the value the more valuable the fund is perceived to be because they have a higher gap between their assets and liabilities. Comparing the two funds shows that American Fund Mutual has a higher NAV. The total assets of JPMorgan Disciplined Equity are $7.7 Billion and the fund uses the large growth investment style (JPMorgan Disciplined Equity). American Fund Mutual has $39 billion total assets making it a much larger fund in comparison and uses a large value investment style (American Fund). JPMorgan Disciplined Equity allocates almost all its assets (97.7%) in Us Stocks (JPMorgan Disciplined Equity. American Fund Mutual also has a large amount of their assets allocated in US Stocks at 79.41% but the find has a more diverse allocation of assets (American Fund). The assets are allocated at 8.96% in Non US Stocks, 4.88$ in cash, 4.56% in other, and 2.19% in bonds (American Fund).
Total returns for a fund is the appreciation of the stock price minus dividends paid. Both JPMorgan Disciplined Equity and American Funds Mutual have shown growth over the 10-year period of a recession starting in 2006. Both funds were on the downward trend from 2006-2008 when the recession really accelerated in 2008 both funds took a nosedive into the negative returns. JPMorgan Disciplined bounced back quicker from the recession in 2009 with a total return rating of 31.54 compared to 25.39 from American Mutual funds. Both funds have followed almost the same trends since then. 2011 was a low year for both but lower for JPMorgan at 1.15 compared to American Mutual at 4.70. After 2011, both funds showed good growth with JPMorgan showing higher total returns over the period of 2012-2014. Finally, both funds took a negative dip in 2015 but have rebounded currently as of 2016 with American Funds Mutual doubling JPMorgan with a total return of 10.63 compared to 5.01.
Year 2006 2007 2008 2009 2010 2011 2012 2013 2014
JPMorgan 15.59 5.13 -36.7 31.54 15.39 1.15 17.2 34.13 15.74
American Mutual 16.17 3.23 -30.13 25.39 12.12 4.7 12.21 27.81 12.49
Year 2015 2016
JPMorgan -2.25 5.01
American Mutual -2.93 10.63
American Funds Mutual has a slightly higher price/prospective earnings ratio at 19.04 than JP Morgan at 18.70. This tells us that American Funds Mutual earns slightly more per share relative to the price the stock is valued at then JP Morgan. Similarly, American Fund Mutual’s price per book ratio is also slightly higher at 3.02 compared to 2.52, which tells us the difference in the funds book value compared to its market value. American Fund Mutual’s price/sales ratio is higher at 2.06 compared to JP Morgan’s 1.75. What this tells us is that JP Morgan has a better value because their cash flow per share is higher relative to the stock price. This tells us JP Morgan has a better relative cash flow than American Funds Mutual. American Funds Mutual has a dividend yield of 3.07% compared to JP Morgan’s 2.12%. What this tells us is that American Funds Mutual is paying out a higher dividend percent compared to their share price making the dividends they payout a better value then JP Morgan. Comparing all the ratios, we can see how American Mutual performs better in some aspects and Jp Morgan performs better in others.
American Funds Mutual has a maximum initial sales fee of 5.75% and does not have a deferred back end fee. JP Morgan does not have an initial sales fee or deferred sales fee. This means that the initial fee paid by the brokers for American Funds Mutual is 5%. American Mutual 12b-1 fee is .22% and JP Morgan Disciplined Equity is .25%. This means that JP Morgan puts .25% and American Mutual puts .22% of their total assets value towards marketing the mutual funds. JP Morgan puts slightly more towards marketing then American Mutual. JP Morgan’s management fees are .25% and American Fund Mutual’s are .24%. This just tells us the percent of the fund’s assets that go toward all the costs of having fund managers. JP Morgan has had the same expense ratio from 2012-2016 at .45. American Fund mutual’s expense ratio has been decreasing year by year. In 2012 it was .72, 2013 .71, 2014 .69, 2015 .68, and 2016 is yet to be determined. This means that JPMorgan uses a lower amount on expenses when compared to their total assets than American Mutual Funds. This means shareholders will pay lower fees compared to American Mutual Funds shareholders.
After comparing JP Morgan Disciplined Equity with American Funds Mutual over the last 10 years one could conclude that in this case both the larger growth fund and large value fund preformed similarly over the course of a recession. In fact, contrary to what Ian Salisbury wrote, the Large Value is currently valued higher than the large growth. The important aspect to note is that both funds followed a similar trend in a steep decline in 2008. From there, both funds were able to bounce back and saw the same growth and decline in the same years. While it might not be the case for all comparisons, JP Morgan Disciplined Equity and American Funds Mutual were able to show good growth throughout a recession.
Disclaimer: This essay has been submitted by a student. This is not an example of the work written by our professional essay writers. You can order our professional work here.
Sorry, copying is not allowed on our website. If you’d like this or any other sample, we’ll happily email it to you.
Your essay sample has been sent.
Want us to write one just for you? We can custom edit this essay into an original, 100% plagiarism free essay.Order now