American Funds Investment Company of America Fund

Scorecard
2 / 5 Stars
Lipper
3 4 5 5 1
Zacks Investment Research
2 (Buy)
Standard & Poor's
4 / 5 Stars
TheStreet.com
C+ (Hold)

#138 in Large Blend

U.S. News evaluated 492 Large Blend Funds. Our list highlights the top-rated funds for long-term investors based on the ratings of leading fund industry researchers.

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Performance

The fund has returned 23.96 percent over the past year, 13.83 percent over the past three years, 18.81 percent over the past five years, and 7.23 percent over the past decade.

Trailing Returns Updated 03.31.2014
Year to date 2.3%
1 Year 24.0%
3 Years (Annualized) 13.8%
5 Years (Annualized) 18.8%
10 Years (Annualized) 7.2%

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Summary

For the Investment Company of America, history started coming full circle in 2009. Created in 1934 when the economy was in the midst of a comeback from the worst of the Great Depression, the fund found itself in a similar market last year and has been counting on the same tried-and-true methods that have allowed it to succeed for more than seven decades.

As of April 22, 2014, the fund has assets totaling $70.62 billion. Its portfolio consists primarily of stocks, many of which are dividend paying.

The fund’s 27 percent gain in 2009 was hardly earth-shattering and since then investors have been steadily leaving the fund according to Morningstar. Management has a strong preference for quality, so the fund missed out on the junk-bond rally that started last year. Still, the fund performed relatively well during the downturn, when it beefed up its already considerable cash stake to cushion the blow of tumbling stock prices and to provide extra liquidity. The managers are maintaining their longstanding reputation as successful stock pickers of some of the largest multinational names on the planet. Among stocks, which dominate the portfolio, the fund has maintained a preference for blue chips, including companies in the tobacco, tech, and telecom industries. The fund has returned 23.96 percent over the last year and 13.83 percent over the last three years.

Historically, the fund’s portfolio has defied categorization. Over the years, management has favored large caps, and it has invested in both growth and value stocks. While Morningstar analysts have noted that the “fund’s ‘tweener’ profile makes it a tougher fit in investors’ portfolios than its [American Funds] siblings,” overall, it has put up a fairly steady performance in its 70-plus years of existence. The fund has returned 18.81 percent over the last five years and 7.23 percent over the last decade.

Investment Strategy

This income-oriented fund maintains a diversified portfolio. “Potential for capital appreciation and future dividends are given more weight than current yield,” according to its prospectus. Management tends to keep a high percentage of its portfolio in cash, often 10 to 15 percent of assets. The fund favors domestic blue chips that pay dividends and has limited exposure to foreign companies, which are capped at 15 percent of assets. According to Morningstar, although the fund favors blue chips, management is willing to pick up growth stocks for the portfolio. Management will also sock away assets in bonds and cash at times.

Role in Portfolio

Morningstar calls it a “core” investment.

Management

A veteran six-person team, four of which have been with the fund for a decade or more, manages the fund. A global team of 140 investment pros support the portfolio managers. "Investors would be hard-pressed to find analysts with greater industry experience," says Morningstar analyst Karin Anderson.

Fees

American Funds Investment Company of America Fund has an expense ratio of 0.61 percent.

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Risk

Like any fund that favors stocks, this one comes with some risks.

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Fund Opinions

The fund's Value Line Overall Rank, a measure of risk-adjusted performance and relative growth in fund returns, is 1 on a scale of 1 to 5, with 1 being the best and 5 the worst.

Value Line 2014-04-10

The fund's Value Line Growth Persistence rank, which awards funds that consistently outperform their broad universes, is 1 for one year, 3 for five years, and 3 for 10 years. Scores are on a 1 to 5 scale, with 1 being the best and 5 the worst.

Value Line 2014-04-10

The fund's Value Line Risk Rank, a measure of volatility, is 2 on a scale of 1 to 5, with 1 being the least volatile and 5 the most.

Value Line 2014-04-10

In the April 2010 edition of Morningstar's Fund Family Reports, John Coumarianos says, "This fund has been around since 1934, and has lived through depressions, booms, and everything in between. Its emphasis on highly profitable, stable businesses is a primary reason for its success."

Morningstar 2010-06-02

In the annual Lipper/Barron's Fund Families Survey of 2009, American Funds ranks 31st out of 61 fund families surveyed.

Lipper

Morningstar gives it a "B" in stewardship on an A to F scale, saying, "A clear sign of the strength of American Funds' culture has been its ability to hire and retain top analysts and portfolio managers (or 'counselors,' as American calls them) and to build out an extensive, worldwide network of researchers."

Morningstar

In the annual Lipper/Barron's Fund Families Survey of 2009, American Funds ranks 31st out of 61 fund families surveyed.

Lipper

Morningstar gives it a "B" in stewardship on an A to F scale, saying, "A clear sign of the strength of American Funds' culture has been its ability to hire and retain top analysts and portfolio managers (or 'counselors,' as American calls them) and to build out an extensive, worldwide network of researchers."

Morningstar