Portfolio Review
The Standard and Poor’s 500 Index (S&P 500)i declined nearly 5% in January, a very disappointing start to 2016. Domestic equities rebounded in February and March and the S&P 500 ended the first quarter with a gain slightly over 1%. The greatest threats at the start of the year - a more aggressive tightening of monetary policy by the Federal Reserve in 2016 than anticipated by investors, a hard landing for the Chinese economy and a continued drop in oil prices - all abated in the first quarter supporting financial asset prices.
During this period, the Westport Fund class R shares modestly outperformed the Russell Midcap® Index by 37 basis pointsii, with a return of 2.61% versus 2.24%. Since inception eighteen and one quarter years ago, the Westport Fund class R shares’ average annual return outperformed the Index by 1.32 percentage points per annum, 10.13% to 8.81% and outperformed the Lipper Multi-Cap Core Index by 4.06 percentage points per year.
The industry sector in the Westport Fund with the best performance in the first quarter was Technology, with a positive contribution of 126 basis points. This exceeded the return of the Technology sector in the Index by 157 basis points. Check Point Software Technologies Ltd. (CHKP, Financial) (security software) led with a 50 basis point contribution followed by Amphenol Corp. (APH, Financial) (connectors and sensors) at 49 basis points and Synopsys Inc. (SNPS, Financial) (design software) at 36 basis points. Consistent with recent history, the Westport Fund has no portfolio holdings in either the Utilities or the REITs industry sectors. Their absence increased the relative performance of the Index by 110 basis points and 47 basis points, respectively. With investors concerned about slowing domestic and global growth during the first quarter, they moved to fixed income securities and equity yield surrogates such as utilities and REITs. Excluding these two industry sectors from first quarter performance calculations, the Westport Fund class R shares outdistanced the Russell Midcap Index by 194 basis points.
Other individual contributors to Fund performance were Time Warner, Inc. (entertainment and media content) and FedEx Corp (logistics) at 42 basis points and 38 basis points, respectively. The largest individual negative contributor to fund performance was Willis Towers Watson PLC (WLTW, Financial) (insurance brokerage and consulting) at negative 24 basis points. The merger between Willis Group Holdings PLC and Towers Watson & Company (TW, Financial) closed early in the first quarter and it appears some Towers Watson & Company shareholders decided to exit after the deal closed. The other industry sector making a significant relative contribution was Health Care at 74 basis points, even though the sector’s actual contribution to the Westport Fund was negative 11 basis points.
Investors should consider the investment objectives, risk, and charges and expenses of The Westport Funds carefully before investing; this and other information about the Funds is in the prospectus, or summary prospectus, which can be obtained by calling 1-888-593-7878 or at our website www.westportfunds.com. Read the prospectus or summary prospectus carefully before you invest.
The views expressed and any forward-looking statements are as of the date of the publication and are those of the portfolio managers and/or the Advisor. Future events or results may vary significantly from those expressed and are subject to change at any time in response to changing circumstances and industry developments.
There are special risks associated with small and mid-capitalization issues such as market illiquidity and greater market volatility than larger capitalization issues.
i The Standard & Poor’s 500 Index is an unmanaged capitalization-weighted index (weighted by the market value of the companies) of 500 stocks listed on the various exchanges.
iiBasis Point is a unit that is equal to 1/100th of 1% and is used to denote the change in a financial instrument.
Portfolio composition is subject to change at any time and should not be considered a recommendation to purchase or sell a particular security. On March 31, 2016, the following securities comprised these respective percentages of the Westport Fund: Check Point Software Technologies Ltd. (7.2%), Amphenol Corp. (5.1%), Synopsys, Inc. (6.2%), Time Warner, Inc. (3.7%), FedEx Corp. (4.5%), Willis Towers Watson PLC (3.1%), Willis Group Holdings PLC (0%), Towers Watson & Co. (0%).
