Mutual Fund LDVAX Booked 37%+ Returns, Is It Still A Buy?

Last Updated on July 14, 2019 by Sultan Beardsley

ESG has been a hot topic amongst the investment community recently. As climate catastrophe looms closer and closer, millennials mature and demand more from corporations and other factors continue to develop, ESG is appearing to be not only more ethical, but more profitable than traditional methods of investment. As a continuation of our coverage on ESG, we will hop over to the USA and take a dive into an ESG mutual fund (LDVAX), which has been booking incredible returns.

What Is LDVAX?

LDVAX is a mutual fund who have earned the stamp of ESG approval from sources such as Investmentnews.com. The fund has been amongst the best performing with returns coming in at 37.23% in a recent report. The fund has placed a massive focus on tech, giving us a glimpse as to why they’re able to cash in on such gains. In the past 52 weeks the fund has ranged from the $12.85-19.91 range. Currently the fund is trading around 19.6, making some weary of entry. Some platforms reflect LDVAX and LELAND Funds engaging in Swaps. In short, an index swap is a form of hedging contract where parties exchange pre determined cash flow with one another on a specific date. This is done in the overnight index swap method by exchanging the overnight rate for a fixed interest rate. These swaps utilize overnight rate indexes such as federal funds rate as explained by Investopedia. This serves as the underlying rate where as the fixed leg is agreed on by both parties.

Outside of the “Swaps” LDVAX engages in, its primary holdings are focused on tech. With its weighting being positioned at 53.92% in tech, LDVAX has seen success in properly timing its investments in tech. Although the success has been massive, LDVAX is riddled with conflicting data across platforms who seem to have outdated data. For the most recent official overview of the funds holdings from their website click here. In addition to the funds latest holdings, potential investors would be wise to view the funds prospectus and verify whether it aligns with your objectives and values. The link to this can be found here.

Funds Performance

LDVAX has attracted many eyes as it has consistently outpaced the market in the past 3 years. On a year to date measure, the fund is up 38.95% where as the S&P has observed 20.14%. Both impressive returns, but diving back to 3 years LDVAX widens its margin farther vs the S&P with returns in excess of 34% while the S&P only returned 14.09%. Historically, evidence seems to be pointing towards opportunity for growth, but technical measures tell a conflicting story when viewing the current share price. LDVAX being so heavily focused on tech presents both a great deal of opportunity and risk. With trade tensions impacting tech, many questions need answers prior to significant moves. With this in mind, positive news in regards to trade tensions etc will inevitably send this fund to new highs. Supporting evidence of this can be found in the bond yields telling a story of pessimistic global economic prospects, which in turn has been perceived to reflect US tech share remaining in the poll position.

Risks

With election season around the corner, tech will inevitably gain the spot light amongst other topics. An increasingly hot topic is in going after big tech with the likes of antitrust etc. Regulation of any kind is traditionally perceived negatively by the exchanges and presents risk as it comes at a terrible time due to the current conditions traditionally attracting buyers of growth poised companies. Some argue that regulation is already being accounted for and these behemoths which LVAX invests in will not be severely impacted, but too much regulation will likely negatively impact an investment in this sector should it unfold as such.

In addition to these massive headwinds that may impact LDVAX, tariffs and other trade related topics are poised to potentially threaten the current share price. If we are provided with a clear direction as to where things will land, LDVAX may present a more compelling bull case.

Opportunities / The Move

LDVAX being heavily positioned in tech may expose portfolios to risk with current tensions and discussions, but presents a great deal of opportunity in the long run due to its focus. ADP, Salesforce, PayPal and other massive tech giants LDVAX holds are all poised for opportunity should they properly execute on guidance they have provided. A more exciting opportunity perhaps; is the the chance to cash in on AI development with their positioning in GOOGL and other giants targeting this opportunity. Tech will inevitably continue to innovate and continue to make investors of the correct areas sizable returns. Historically LDVAX has supported their ability to leverage this as is observed by their returns. Many factors point towards this being continued, but investors need to be critical of upcoming risks and how they may impact the share price. Personally I am titillated by the opportunity to stow money away in a mutual fund that provides returns of this value. It’s less work for us investors, we sit back and watch our money grow…or so we hope. There certainly appears to be a bull case for the fund should history repeat itself, but there are a handful of risks associated. Personally I don’t like the current price and subscribe to the technical perspective which suggests a cheaper entry in the future. With that in mind, the fund has hit impressive numbers and clearly has a strategy that works should conditions persist. With little events having threatened their historical approach, the fund certainly seems to poised to book gains of this scale in the future. Personally I have digested this data with an outcome of watching and hoping for a more optimal entry in the future.

I do not own any LDVAX, but may buy in the future. I was not compensated by LDVAX for this piece