Series One Letter
I am pleased to deliver to you the American Growth Fund Series One Semi Annual Report for the year ending January 31, 2019.
December 2018 was a volatile month for financial markets. The S&P
500 fell 9.6% for the month of December, making it the worst closing month
to the year since 1931, when it sank 14.5%1. December's volatility left
many in the market with slack jaws. According to a December 2018 CNN Business
article, In one ten-day span, the Dow Jones Industrial Average fell more
than 350 points six times. There was also one day when the Dow rose by
1,000 points - the biggest point gain ever. The S&P 500 was up or
down more than 1% nine times in December and 64 times this year. In all
of 2017, that happened only eight times. In a show of global economics;
However, the beginning of the market's recovery was just around the corner. In January 2019, both developed and emerging market equities gained over 7% in total return terms, boosted by signals from the US Federal Reserve that it would be more patient with further rate rises then it had stated it would be in 2018, as well as by improving rhetoric towards China from the White House. Even so, political uncertainty remains a headwind, while recent data continues to send mixed signals about the outlook for the global economy.3 Stocks recorded solid gains in February making for the best start to a year in nearly three decades with the S&P 500 closing up 11.48% year to date (ended February 28, 2019). The S&P 500 Index recorded only two daily moves exceeding 1% during February-a notable contrast from the fourth quarter of 2018, when such swings occurred on four out of every five trading days.4 As always its important to remember that past performance does not guarantee future results.
In my last report I discussed my optimism that the U.S. economy would continue to lead the world market, that domestically there continues to be political infighting within, as well as between, the presidential and legislative branches of our government. Neither of those beliefs have changed. Although Series One is invested primarily in Large Cap domestic stocks, it is important to remember that other world economies affect the holdings in your portfolio. Notably, as you may have seen on the news, there are two additional items to keep an eye on. First is the slowing of China's economy that we touched on above. The slowing of its economy and tariffs imposed by President Trump warrant a watchful eye. Second, Brexit and the turmoil that it has placed not only on England but also on the European Union and the world market.
Real gross domestic product (GDP) increased at an annual rate of 2.6 percent in the fourth quarter of 2018. Real gross domestic income for the third quarter of 2018, the percent change in real GDI was revised from 4.3 percent to 4.6 percent based on newly available tabulations from the BLS Quarterly Census of Employment and Wages program. Real GDP increased 2.9 percent in 2018 (from the 2017 annual level to the 2018 annual level), compared with an increase of 2.2 percent in 2017.5 Additionally, the Unemployment Rate has lowered slightly since our last report from 3.9% in July 2018 to 3.8% in February 2019.6 It is the Investment Committee's outlook that the U.S. Economy will likely continue to be strong.
Your American Growth Fund Series One Class A Shares delivered you a (3.03)% return since July 31, 2018 through close of business on January 31, 2019. The Dow Jones Industrial Average posted a loss of 0.49% while the S&P 500 posted a loss of 3.00% for the same time period as listed above. Of the stocks in your Series One portfolio, most of them contributed to the growth of the Fund. The top three active performing investments were Starbucks Corp whose market value rose 29.78% (which contributed to a gain of 17.63% of the total loss on investments), Vestas Wind Systems A/S whose market value rose 29.26% (which contributed to a gain of 6.27% of the total loss on investments) and Ulta Beauty, Inc. whose market value rose 19.45% (which contributed to a gain of 7.61% of the total loss on investments).
Unfortunately, not all investments fared as well. NVIDIA Corp whose market value fell 46.04% (which contributed to a loss of 8.84% of the total loss on investments), General Electric whose market value fell 39.89% (which contributed to a loss of 8.70% of the total loss on investments) and Balchem Corp whose market value fell 17.20% (which contributed to a loss of 11.45% to the total loss on investments).
The investment sectors that had the most positive influence on your Series One portfolio were Restaurants, Computer & Peripherals, and Computer Software and Services. The investment sectors that had the most adverse effect on your portfolio were Semiconductor Capital Equipment, Drugs, and Computer Hardware.
Additional data, including long-term performance data, can be located on page 28 of this report. Past performance is no guarantee of future results.
Like our last report, over the next six months we will likely see some more changes in the world. Our Investment Committee will continue to monitor the dollar's value against the world currencies, signs of a possible trade war, the European economy, as well as the global impact of economic sanctions against North Korea and any other major world developments that might affect the U.S. economy and the stocks we are invested in.
As we look at these indicators of how our economy is doing, we generally continue to be cautiously optimistic. It is our hope that we will see continued growth in the upcoming months.
My staff and I are always available to discuss your account or answer any questions you might have. Please call our toll free number, 800 525-2406 or, within Colorado, 303-626-0600.
American Growth Fund wishes you A Good Future!
Capital Brokerage, Inc.
Class D without load
Class D with load*
Class A without load
Class A with load*
Class B without load
Class C without load
a 5.75% sales charge based on a $10,000 initial purchase.
1 Includes the B Share to A Share conversion after 7 years.
2 Includes the C Share to A Share conversion after 7 years.