Monetta Young Investor Growth Fund (MYIFX)
Investment Objective / Approach
The Monetta Young Investor Growth Fund (formerly the Monetta Core Growth Fund) seeks long-term capital growth by employing a symbiotic “passive/active” investment approach.
The Fund invests approximately 50% of its assets in exchange-traded funds (ETFs) and other funds that, together, seek to track the S&P 500® Index. The remaining balance of the Fund is invested in high-quality, large capitalization growth companies that have demonstrated a history of improving revenue and earnings growth.
The Fund is intended to serve as a core component to a portfolio, whether as a first-ever investment by a young investor or as a basic portfolio building block for an investor of any age.
The combination of passive and active provides a turnkey solution—broad-based market exposure plus a carefully selected group of high quality, growth-oriented companies. Our intended goal with this approach is to deliver long-term growth and provide a measure of downside protection during periods of market downturns.
The Monetta Young Investor Growth Fund’s “half active/half passive” investment approach is the result of our many years of observing what investment strategies potentially work and what doesn’t over time. Our philosophy incorporates insights from the following well-known investors:
“On average, an astonishing 90% of actively managed funds underperform their benchmark indexes over the preceding 15 years (2001-2016).” (1)
Approximately 50% of the Fund’s portfolio will track the performance of the S&P 500 Index.
“Best returns are achieved by companies that have been producing the same product or service for several years.” (2)
The Monetta Young Investor Growth Fund emphasizes high-quality growth companies with a competitive edge.
“It is more likely to pay off to buy companies at a seemingly high price…than to attempt to discover when a declining situation will turn around.” (3)
The Fund’s basic investment strategy is to buy high and sell higher.
“Never invest in any idea you can’t illustrate with a crayon…invest in companies you understand.” (4)
Our Fund tends to have a bias to invest in quality, household names with proven/experienced management teams and strong growth prospects.
“Market-leading firms are considerably less volatile than the market as a whole…Relative strength is a much better indicator of a company prospects than factors such as earnings growth rates.” (5)
The Monetta Young Investor Growth Fund seeks companies with improving relative strength relative to its sector and overall market.
Passive Component Overview
We construct the passive portion of the portfolio using ETFs and other funds with the goal of providing:
- Matched market returns
- Broad market diversification
- Tracked market volatility
- Minimized portfolio turnover
- No style drift
Active Component Overview
The active portion of the portfolio complements the passive portion by providing exposure to a concentrated number of high-quality, large-cap growth stocks. Stocks are initially screened on technical factors such as price momentum, money flows and relative strength. To further refine our search, we evaluate company fundamentals such as:
- Competitive dynamics
- Management’s track record and ability to execute a growth strategy
- Balance sheet strength
- Positive cash flow
- Quarterly earnings trends that exceed expectations
- Higher company guidance
- Dividend growth opportunities
Portfolio Construction and Sell Discipline
The Monetta Young Investor Growth Fund is generally split 50/50 between its active and passive components, though the relative proportions may vary between 40 and 60% of the portfolio. The passive component is rebalanced as needed over time.
The Fund’s active component generally consists of 25-30 companies, each with a market capitalization typically greater than $10 billion at the time of purchase. The average security weighting is typically around 2%, with no security exceeding 5% at the time of purchase. We are generally quick to sell a stock if management lowers guidance or our investment thesis changes.
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Standard and Poor’s 500® Index is a capitalization-weighted index of 500 stocks. This unmanaged index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The index was developed with a base level of 10 for the 1941-43 base period. You cannot invest directly in an index.
Alpha compares risk-adjusted performance relative to an index. Positive alpha means outperformance on a risk-adjusted basis. Beta measures the volatility of a security or portfolio relative to an index. Less than one means lower volatility than the index; more than one means greater volatility. R-squared (R2) measures the relationship between portfolio and index performance on a scale of 0.00 (0%) to 1.00 (100%). A higher R2 indicates more of the portfolio’s performance is affected by market movements and vice versa. Price-to-Earnings (P/E) is calculated by dividing the current price of a stock by the company’s trailing 12 months’ earnings per share.
(**) As of September 30, 2022 Exchange Traded Funds included:
- SPDR S&P 500 ETF Trust 37.58%
- Vanguard Index FDS S&P 500 Index ETF Fund 13.60%
respectively of the Fund’s net assets. Fund holdings and composition are subject to change and are not recommendations to buy or sell any security. Current and future portfolio holdings are subject to risk.
(1) Bogle, John C. The Little Book of Common Sense Investing: the Only Way to Guarantee Your Fair Share of Stock… Market Returns. John Wiley, 2017, p. 33.
(2) Hagstrom, Robert G. The Warren Buffet Way: Third Edition. John Wiley, 2014, p. 78.
(3) Loeb, Gerald M. The Battle for Investment Survival. John Wiley, 2007, p. 227.
(4) Lynch, Peter, and John Rothchild. Beating the Street: a Special Edition for Worth Subscribers. Simon & Schuster, 1994, p. 27, 303.
(5) O’Shaughnessy, James P. What Works on Wall Street: the Classic Guide to the Best-Performing Investment Strategies of All Time. McGraw Hill, 2012, p. 192, 238.