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2 Excellent Long-Term Options From Primecap

Alec Lucas, Ph.D.

Since its 1983 founding, Pasadena, California-based Primecap Management Company has established itself as a premier asset manager. The firm has two strategies open to new investors: Primecap Odyssey Growth, which has a Morningstar Analyst Rating of Gold, and Primecap Odyssey Stock, which also has a Morningstar Analyst Rating of Gold. Both funds share the same veteran, four-person management team, employ a multimanager approach that divides each fund's asset base into separately run sleeves, and have below average fees versus similarly distributed peers. 

Where the two funds differ is in their mandates. Odyssey Growth focuses on mid- and large-cap stocks that the managers believe have above-average growth potential not reflected in the current market prices, whereas Odyssey Stock tends to invest in more stable, large-cap companies that are attractive for a variety of reasons, including faster than anticipated growth potential, superior profitability, and undervalued assets. 

The mandates overlap, as do the fund's holdings. In March 2018, the two funds had an active share of 50%, a figure that includes both holdings shared in common and the respective weights of those holdings. In the end, though, Odyssey Growth has a more aggressive profile than Odyssey Stock. In March 2018, for example, Odyssey Growth had a combined 34% of its assets in small- and mid-cap stocks, and the volatile biotech stock Nektar Therapeutics was its top holding. In contrast, Odyssey Stock then had about 10% of its assets in small- and mid-cap stocks, and its top holding was JPMorgan Chase.

Both funds have outstanding track records versus their respective Morningstar Category peer groups and benchmarks--large-growth and the Russell 1000 Growth Index for Odyssey Growth and large-blend and the Russell 1000 Index for Odyssey Stock. Both funds are excellent long-term options. Deciding between them comes down to one's risk tolerance.