Ivy Value Fund

Ivy Value Fund

Market Sector Update

  • The market continued nudging higher, with many indexes setting new all-time highs in late June. Positives include a strong economy creating good company earnings, as well as few signs of inflation.
  • However, the market is struggling with high valuations, rising interest rates and lingering disappointment in the Trump administration's inability to deliver on its pro-growth agenda.
  • The Russell 1000 Value Index’s (the Fund’s benchmark) return for second quarter was 1.34%. Value did outperform growth in June, but we view this occurrence as part of the short-term ebb and flow rather than the start of a trend. As usual, we try to ignore short-term fluctuations and keep our focus on the long term.
  • There were few negatives for the quarter with real estate being the only sector detracting from relative performance.

Portfolio Strategy

  • For the quarter, the Fund had a positive return (before the effect of sales changes) and slightly outperformed the benchmark, largely due to individual stock selection.
  • For the quarter, the Fund's biggest overweights were in the financials, healthcare and consumer discretionary sectors. We believe the U.S. banking system is strong and well capitalized, with many equities attractively priced.
  • The U.S. Federal Reserve's (Fed) recent Comprehensive Capital Analysis and Review (CCAR) gave most large banks the ability to raise dividends and repurchase shares, adding to their appeal.
  • In other over weighted sectors, our holdings are more a function of incidental names than any overall theme. Industries held include health maintenance organizations, pharmaceuticals and cable television.
  • The Fund's major underweights are industrials, consumer staples and telecommunications. We see very little value in these sectors, although there are some ideas in industrials that we are interested in if an attractive price presents itself.


  • After eight years and some stops and starts, the U.S. economy has recovered from the recession in 2008 and seems to have settled out in a low single-digit growth area. Recent data has been even more encouraging, with a recovery of jobs and capital expenditures in the energy sector and improvements in the labor market and manufacturing data.
  • The next challenge will be for the Fed to tighten its monetary policy. As expected, the Fed raised the key federal funds rate by 0.25 percentage point in June, and we believe an additional rate hike is possible before the end of the year. Slowing the economy and inflation via interest rate hikes is a difficult job however, one we liken to stepping on a rolling egg to stop it without breaking it. History shows a high probability of failure, particularly if raising interest rates too much and initiating a recession. This is something we will watch carefully.
  • While the economic forces listed above are clearly important factors, our team’s first approach is at the company level. We seek to find quality, growing companies whose stocks are trading below what we consider their intrinsic values. Often this is due to short-term negative factors, and we become larger owners of a company if we feel those negatives are about to dissipate.
  • We continue to search for and make investments one company at a time, seeking to benefit clients over the long run.

The opinions expressed are those of the Fund’s managers and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through June 30, 2017, are subject to change at any time based on market and other current conditions, and no forecasts can be guaranteed. This commentary is being provided as a general source of information and is not intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy. Investment decisions should always be made based on an investor’s specific objectives, financial needs, risk tolerance and time horizon. Past performance is not a guarantee of future results.

Top 10 holdings (%) as of 06/30/2017: JPMorgan Chase 4.8, Citigroup, Inc. 4.1, Capital One Financial 3.9, Synchrony Financial 3.9, State Street 3.5, Energy Transfer Partners 3.1, Dow Chemical Co. 3.1, American International Group 3.0, MetLife, Inc. 3.0, Signa Corp 2.9.

The Russell 1000 Value Index is an unmanaged index comprised of securities that represent the large cap sector of the stock market. It is not possible to invest directly in an index.

Risk factors: The value of the Fund’s shares will change, and you could lose money on your investment. The value of a security believed by the Fund’s manager to be undervalued may never reach what the manager believes to be its full value, or such security’s value may decrease. An investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. These and other risks are more fully described in the Fund’s prospectus. Not all funds or fund classes may be offered at all broker/dealers.

IVY INVESTMENTS® refers to the investment management and investment advisory services offered by Ivy Investment Management Company, the financial services offered by Ivy Distributors, Inc., a FINRA member broker dealer and the distributor of IVY FUNDS® mutual funds and IVY VARIABLE INSURANCE PORTFOLIOS℠ , and the financial services offered by their affiliates.