Edgewood Growth Fund

Edgewood Growth Fund Shareholder Letter - April 30, 2015

Dear Shareholders:

Your Fund’s performance was +2.08% (Institutional Shares) and +1.88% (Retail Shares) for the six months ended April 30, 2015. The performance of the S&P 500 Growth Index was +5.08%, and the S&P 500 Index was +4.40% in the same period of time. Looking at the trailing twelve months, the Fund appreciated by +16.80% (Institutional Shares) and +16.41% (Retail Shares). In the same trailing twelve month period, the S&P 500 Growth Index grew by +16.32% and the S&P 500 Index appreciated by +12.98%.

Over the last six months the top portfolio contributors were Amazon.com Inc., Cognizant Technology Solutions, ARM Holdings plc, Equinix Inc., and Apple Inc. One year ago we mentioned that Amazon had been a portfolio detractor due to marginally slowing sales growth and margin concerns. In spite of the concerns we were adding to the position. Since then, the sales and margin concerns have been somewhat allayed, and the stock has been a strong performer. Cognizant continues to execute very well in their markets, and the stock has acted accordingly. ARM Holdings is a fairly new holding and we were able to acquire shares when they were under pressure some time ago. Market concerns have been getting a bit better and the shares have responded nicely. Equinix has been growing somewhat faster than some had thought and we believe that is why the stock acts well. Finally, Apple has not only rolled out good new products, but also they have continuously stepped up the return of cash to shareholders.

The top portfolio detractors over the last six months have been Stratasys Ltd., Gilead Sciences Inc., FMC Technologies Inc., Illumina Inc. and Twenty-First Century Fox. Stratasys addresses the 3D printing market and we think they are having some growing pains. Gilead Sciences has been a fabulous stock for shareholders and had a bit of a decline due to pricing concerns. We are not concerned. FMC Technologies operates in the value added deep sea oil service business. Despite the fact that they are an extremely good operator, the massive drop in the price of oil hurt the stock. We have sold the shares as we have no idea when the price of oil will be higher. Illumina has also been a very good stock for shareholders, one that we have mentioned twice in the past year as a portfolio contributor. The shares have taken a bit of a pause, but from our perspective, the company’s market opportunity in gene sequencing is growing exponentially. Twenty-First Century Fox is taking a bit longer to help portfolio performance than we originally thought. We do, however, believe our investment case is intact. 

Our outlook remains much the same as previous letters. The US economy seems to “chug along” at a 2-3% rate and the environment for stocks, in our view is good. Certainly markets can correct at any time for a variety of reasons, but we still think the Fund is well set for long term appreciation. As mentioned in other letters, the main driver of Fund performance should be strong underlying earnings growth of the portfolio companies. We think aggregate earnings per share growth in the Fund holdings should continue to be in the 15-20% per annum range, assuming decent economic growth. We are not referring to portfolio price performance but just to underlying earnings growth of the companies you are invested in.

We hope that rapid earnings per share growth can translate to good price appreciation over time 


Edgewood Management LLC 



This material represents the manager’s assessment of the portfolio and market environment at a specific point in time and should not be relied upon by the reader as research or investment advice.

Definition of Comparative Indices

The S&P 500 Growth Index is a market capitalization weighted index consisting of those stocks within the S&P 500 Index that exhibit strong growth characteristics.

The S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market-value weighted index (stock price times number of shares outstanding), with each stock’s weight in the Index proportionate to its market value. The “S&P 500” is one of the most widely used benchmarks of U.S. equity performance.

Mutual fund investing involves risk, including loss of principal. The Edgewood Growth Fund is a non diversified fund.