American Century Focused Large Cap Value’s robust, risk-aware process makes it a decent offering in the large-value Morningstar Category. 

Brian Woglom plies a sturdy approach. At the helm since January 2016, Woglom has led the strategy through three process tweaks, the latest being a move to a more concentrated portfolio in December 2020. Now Woglom targets 30-50 holdings, down from 60-80, aiming to load assets into the team’s most attractive ideas from a risk/reward perspective. He and the team target firms with improving returns on capital, low leverage, and durable competitive advantages, such as brand recognition or market share leadership. They build base- and bear-case estimates for each stock, aiming to invest in firms with the smallest differences between the two. Holdings get more weight in the portfolio by having a narrower range of expected outcomes than by having splashy upside potential. Valuation plays a key role in estimating risk and reward, and Woglom sticks to the approach. The process typically protects on the downside. For example, in the 2022 selloff, the benchmark Russell 1000 Value Index slipped 7.5% but the fund’s investor shares gained 1.7%.

Woglom and the team boast significant experience, but they still need to prove themselves. Woglom, an example of homegrown talent, joined the firm in 2005 as an analyst before being promoted to comanager on American Century Mid Cap Value ACCLX in 2012 and American Century Equity Income TWEIX in 2019. He’s led this strategy since January 2016 backed by four comanagers, including CIO Kevin Toney and two other multidecade veterans of the firm. Adam Krenn, a longtime analyst and the newest portfolio manager here, has nearly 20 years of industry experience and 12 at the firm. Meanwhile, the 10-member analyst team is sufficiently deep, with the median analyst carrying a dozen years of experience and five at the firm. Woglom became the lead manager of American Century Equity Income TWEIX in January 2023, which will divert some of his time away from this fund, but the team still has sufficient resources.  Overall, this is a reasonable large-value choice, especially for risk-conscious investors.

Analyst Rating

A concentrated portfolio that typically protects on the downside.

Analyst

Drew Carter

Johnson & Johnson

Medtronic

Zimmer Biomet Hlds

Duke Energy

Atmos Energy

Exxon Mobil

Norfolk Southern

Colgate-Palmolive

Reinsurance Group of America

This concentrated version of American Century’s value process produces a steady portfolio with solid fundamentals at reasonable valuations. It keeps its Above Average Process rating.

The investment process here begins much as it does at the value team's other charges. Lead manager Brian Woglom and team first trim the universe to about 550 firms that meet criteria on such quality factors as improving returns on capital, low leverage, and strong competitive positioning. This limited universe doesn't change much over time and contributes to an efficient research workload. The team estimates a risk/reward ratio based on its in-depth fundamental analysis of each company. From there, it layers in valuation by targeting firms trading below the team's fair-value calculation with limited downside risk.

In December 2020, the team completed a transition to a more concentrated offering aimed at loading assets into the team’s best ideas. Now, it targets 30-50 holdings, down from 60-80 previously. The more concentrated approach wasn’t new, as Woglom had been running it through a separately managed account whose record stretches back to January 2017. Encouragingly, Woglom keeps a close eye on stocks’ risk/reward ratios while eschewing firms with higher business uncertainty. This has helped keep volatility lower than the typical large-value category peer. The exchange-traded version also incorporates tax-management strategies, including tax-loss harvesting and adjusting holding periods for preferential tax treatment.

Above Average

Process

This team boasts deep experience, but lead manager Brian Woglom still has more to prove. The strategy retains an Average People rating.

Experience here runs deep. Woglom, an example of homegrown talent, joined the firm in 2005 as an analyst before being promoted to comanager on American Century Mid Cap Value ACCLX in 2012 and American Century Equity Income TWEIX in 2019. He’s led this strategy since January 2016, backed by four comanagers, including CIO Kevin Toney and Michael Liss, both multidecade veterans of the firm and industry. Phil Sundell, who continues to carry some analyst duties, is another multidecade veteran. Adam Krenn is the newest portfolio manager, but he too has nearly 20 years of industry experience and 12 at the firm. The analyst team has stabilized and matured in recent years after a period of higher turnover. The median analyst carries a dozen years’ experience and five at the firm.

Despite his role here, Woglom took the lead on American Century Equity Income at the start of 2023 ahead of Phil Davidson’s retirement, and too little time has passed to fully assess his ability to captain both strategies successfully. Helpfully, the two portfolios overlap considerably on stock holdings, with about 70% of this portfolio’s names also used in its sibling’s portfolio. He leans on a deep group, including a core management team that also helps manage American Century Equity Income.

Average

People

An evolution is taking hold at American Century, but some pluses and minuses continue, supporting a continued Parent rating of Average.
The firm entered the ETF market in 2019 by launching Avantis Investors, led by former executives from Dimensional, a strong firm that manages semi-passive strategies with value tilts and low fees. Avantis is now running roughly a dozen ETFs with similar features, while American Century’s in-house teams manage another 16 active ETFs. This effort is still fairly new and small as a percentage of assets under management, as most ETFs have been launched since 2019, but they help American Century compete with lower-cost passive and strategic-beta funds.
The bulk of the firm’s assets remain in U.S. mutual funds run by its internal boutiques. The U.S. value team has long been a standout, with tenured, stable management and good long-term results, but other investment teams haven’t produced consistently distinctive portfolios or performance, and some have continued to endure investment-professional turnover.
The firm’s ownership structure is noteworthy and supports a long-term strategy. While the firm has worked with a few large minority shareholders, including current 41% stakeholder Nomura, The Stowers Institute for Medical Research owns 45% of the firm but holds 70% of the equity voting rights. Employees own the rest, which should encourage retention.

Parent

American Century Focused Large Cap Value ETF

FLV is an actively managed, non-transparent ETF that invests in a narrow selection of US large-cap value companies. The fund utilizes the Precidian non-transparent model.

American Century Focused Dynamic Growth ETF

American Century Investments has transferred its first two semi-transparent ETFs to hit the market to a new exchange. The American Century Focused Dynamic Growth ETF (NYSE Arca: FDG) and the American Century Focused Large Cap Value ETF (NYSE Arca: FLV) have moved from the Cboe BZX Exchange to the NYSE Arca.

American Century Transfers Debut Semi-Transparent ETFs to the NYSE

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In terms of stocks, not much is working this year, but investors looking for “significantly less bad” can find just that with value stocks and exchange traded funds. When keeping things in perspective and realizing upside is hard to come by this year, the American Century Focused Large Cap Value ETF (FLV) is an idea [.

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Active managers resisted launching ETFs for years due to concerns that disclosing their holdings daily would reveal their trade secrets. So, the year after the Securities and Exchange Commission approved non-transparent funds, American Century Investments launched two active, semi-transparent ETFs: the American Century Focused Dynamic Growth ETF (FDG) and the American Century Focused Large Cap Value [.

News for American Century Focused Large Cap Value ETF ETF (FLV)