Active Equities

Multi-Cap Core Fund (Class Y)  (PMYYX)

Seeking opportunities across a wide range of stocks

Q2 2020 | Multi-Cap Core Fund Q&A

  • The fund delivered a solid return for the quarter but underperformed its benchmark index.
  • We were focused on stocks that we believe offer attractive valuations and the potential for strong earnings in a recovering economy.
  • We continue to believe cheaper stocks are poised for meaningful appreciation, and our portfolio has overweight exposure to banking, energy, and airline stocks, all of which are deeply depressed.

How did equity markets and the fund fare in the second quarter?

Although markets remained volatile, the second quarter brought a strong rebound for U.S. stocks, with the S&P 500 Index posting its best quarterly return in over 20 years. After posting double-digit losses in March, equities experienced a historic turnaround in April, when indexes recorded double-digit gains. During much of the quarter, improving economic data and investor sentiment about the reopening of the economy drove stocks higher. The Federal Reserve held interest rates steady and vowed to act appropriately to support the economy, introducing several programs to support liquidity and stability in funding markets. However, worries persisted about the COVID-19 pandemic, and equity returns were modest in June as coronavirus cases began to surge again. The fund posted a solid return for the quarter but underperformed its Russell 3000 Index benchmark.

How was the fund positioned in the quarter?

We were focused on stocks that we believe offer attractive valuations and the potential for strong earnings in a recovering economy. During the quarter, investors continued to be attracted to the market’s fastest and most consistent top-line growers, without much regard for their high and expanding valuations.

You have observed that the market is set up for a massive rotation. Could you explain your perspective?

In today’s market, we are seeing significant valuation disparities. The gap between the market’s most expensive and least expensive stocks is very wide. Historically, this type of disparity has not held for very long, and we believe this current gap is unsustainable. Many times throughout history, once the market shifted from such wide disparities, the cheapest quintile of stocks outperformed the most expensive quintile over the following 12 months.

We are positioning the portfolio to exploit this anomaly. The fund is generally cheaper than its peers and the Russell 3000 Index on many standard valuation metrics, such as price to earnings, price to book, and price to sales. This strategy began to pay off late last year, but it was upended by the onslaught of the COVID-19 pandemic. We continue to believe cheaper stocks are poised for meaningful appreciation, and our portfolio has overweight exposure to banking, energy, and airline stocks, all of which are deeply depressed.

What is your outlook as we enter the second half of 2020?

There is still much uncertainty about when economic growth will recover, but it is clearly dependent on getting the coronavirus under control. The most encouraging event would be the development and approval of an effective vaccine for COVID-19.

We believe the broad equity market could experience significant declines over the next 12 months. However, in our research, we are looking ahead a year from now and beyond, and assessing each company’s earnings power to determine which businesses offer the strongest long-term growth prospects. We believe many holdings in our portfolio have the financial strength to weather this disruption.

Highlights

Objective

The fund seeks capital appreciation.

Strategy and process

  • "Go anywhere" approach: The fund invests in stocks of U.S. companies of all sizes and has the flexibility to own both growth and value stocks.
  • A disciplined process: The portfolio managers use a disciplined, fundamental investment process with three buckets of idea generation: legacy companies, smart-money indicators, and special situations.
  • Research focus: Backed by an Equity Research team, the portfolio managers use their stock-picking expertise to identify opportunities and manage risk.

Fund price

Yesterday’s close 52-week high 52-week low
Net asset value $26.03
0.23% | $0.06
$27.12
02/12/20
$17.56
03/23/20
(Optional)

Consistency of positive performance over five years

Performance represents 5-year returns in rolling quarter-end periods since inception.

Performance shown does not reflect the effects of any sales charges. Note that returns of 0.00% are counted as positive periods. For complete fund performance, please click on the performance tab.

17.25%

Best 5-year annualized return

(for period ending 09/30/16)


4.84%

Worst 5-year annualized return

(for period ending 03/31/20)


12.50%

Average 5-year annualized return


Fund facts as of 07/31/20

Total net assets
$2,418.87M
Turnover (fiscal year end)
26%
Dividend frequency
Annually
Number of holdings
140
Fiscal year-end
April
CUSIP / Fund code
74676P839 / 1876
Inception date
09/24/10
Category
Blend
Open to new investors
Ticker
PMYYX

Management team

Portfolio Manager
Portfolio Manager, Analyst


Performance

  • Total return (%) as of 06/30/20

  • Annual performance as of 06/30/20

Annualized Total return (%) as of 06/30/20

Annualized performance 1 yr. 3 yrs. 5 yrs. Life (inception: 09/24/10 )
Before sales charge 6.18% 9.34% 8.80% 13.72%
After sales charge N/A N/A N/A N/A
Russell 3000 Index 6.53%10.04%10.03%--

Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will vary, and you may have a gain or loss when you sell your shares. Performance assumes reinvestment of distributions and does not account for taxes. Returns before sales charge do not reflect the current maximum sales charges as indicated below. Had the sales charge been reflected, returns would be lower. Returns at public offering price (after sales charge) for class A and class M shares reflect the current maximum initial sales charges of 5.75% and 3.50% for equity funds and 4.00% and 3.25% for income funds (2.25% for class A of Putnam Floating Rate Income Fund, Short-Term Municipal Income, Short Duration Bond Fund, and Fixed Income Absolute Return Fund), respectively. Class B share returns reflect the applicable contingent deferred sales charge (CDSC), which is 5% in the first year, declining to 1% in the sixth year, and is eliminated thereafter (except for Putnam Floating Rate Income Fund, Putnam Short Duration Bond Fund, Putnam Fixed Income Absolute Return Fund, and Putnam Short-Term Municipal Income Fund, which is 1% in the first year, declining to 0.5% in the second year, and is eliminated thereafter). Class C shares reflect a 1% CDSC the first year that is eliminated thereafter. Performance for class B, C, M, N, R, and Y shares prior to their inception is derived from the historical performance of class A shares, adjusted for the applicable sales charge (or CDSC) and, except for class Y shares, the higher operating expenses for such shares (with the exception of Putnam Tax-Free High Yield Fund and Putnam AMT-Free Municipal Fund, which are based on the historical performance of class B shares). Performance for class A, C, R6, and Y shares of Putnam Mortgage Opportunities Fund before their inception is derived from the historical performance of class I shares, which have been adjusted for the applicable sales charge (or CDSC) and the higher operating expenses for such shares. Returns at public offering price (after sales charge) for class N shares reflect the current maximum initial sales charge of 1.50%. Class R5/R6 shares, available to qualified employee-benefit plans only, are sold without an initial sales charge and have no CDSC. Class Y shares are generally only available for corporate and institutional clients and have no initial sales charge. Performance for class R5/R6 shares before their inception are derived from the historical performance of class Y shares, which have not been adjusted for the lower expenses; had they, returns would have been higher. Class A shares of Putnam money market funds have no initial sales charge. For a portion of the period, some funds had expenses limitations or had been sold on a limited basis with limited assets and expenses, without which returns would be lower.

Performance snapshot

  Before sales charge After sales charge
1 mt. as of 07/31/20 5.24% -
YTD as of 08/03/20 -0.42% -

Risk-adjusted performance as of 06/30/20

Alpha (3 yrs.) -0.97
Sharpe ratio (3 yrs.) 0.42
Treynor ratio (3 yrs.) 7.46
Information ratio (3 yrs.) -0.30

Volatility as of 06/30/20

Standard deviation (3 yrs.) 18.15%
Beta 1.03
R-squared 0.98

Capture ratio as of 06/30/20

Up-market (3 yrs.) 103.16
Down-market (3 yrs.) 107.54

Lipper rankings as of 06/30/20

Time period Rank/Funds in category Percentile ranking
1 yr. 215/685 32%
3 yrs. 178/612 30%
5 yrs. 168/514 33%
10 yrs. --  
Lipper category: Multi-Cap Core Funds

Morningstar Ratings as of 06/30/20

Time period Funds in category Morningstar Rating
Overall 1230
3 yrs. 1230
5 yrs. 1058
Morningstar category: Large Blend

Distributions

Record/Ex dividend date 12/05/19
Payable date 12/09/19
Income $0.268
Extra income --
Short-term cap. gain $0.028
Long-term cap. gain $0.946

Lipper rankings are based on total return without sales charge relative to all share classes of funds with similar objectives as determined by Lipper. Past performance is not indicative of future results.

The Morningstar RatingTM for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.

The up-market capture ratio is used to evaluate how well an investment manager performed relative to an index during periods when that index has risen. The ratio is calculated by dividing the manager’s returns by the returns of the index during the up-market, and multiplying that factor by 100. The down-market capture ratio is used to evaluate how well an investment manager performed relative to an index during periods when that index has dropped. The ratio is calculated by dividing the manager’s returns by the returns of the index during the down-market and multiplying that factor by 100.


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Holdings

Microsoft Corp 8.57%
Apple 6.85%
Amazon.Com 3.88%
Alphabet 2.99%
Bank Of America Corp 2.40%
JPMorgan Chase 1.99%
Amgen 1.91%
Facebook 1.86%
Visa 1.83%
Cisco Systems 1.82%
Top 10 holdings, percent of portfolio 34.10%



Portfolio composition as of 06/30/20

Common stock 99.06%
Convertible bonds 0.81%
Cash and net other assets 0.13%

Equity statistics as of 06/30/20

Median market cap $24.70B
Weighted average market cap $424.67B
Price to book 2.57
Price to earnings 17.11

Fund characteristics will vary over time.

Due to rounding, percentages may not equal 100%.

Consider these risks before investing: Investments in small and/or midsize companies increase the risk of greater price fluctuations. Growth stocks may be more susceptible to earnings disappointments, and value stocks may fail to rebound. The value of investments in the fund’s portfolio may fall or fail to rise over extended periods of time for a variety of reasons, including general economic, political or financial market conditions, investor sentiment and market perceptions, government actions, geopolitical events or changes, and factors related to a specific issuer, geography, industry or sector. These and other factors may lead to increased volatility and reduced liquidity in the fund’s portfolio holdings. Our investment techniques, analyses, and judgments may not produce the outcome we intend. The investments we select for the fund may not perform as well as other securities that we do not select for the fund. We, or the fund's other service providers, may experience disruptions or operating errors that could have a negative effect on the fund. You can lose money by investing in the fund.

Top industry sectors as of 06/30/20

Information technology 26.78%
Health care 13.99%
Financials 13.26%
Consumer discretionary 12.92%
Communication services 8.29%
Industrials 7.74%
Consumer staples 5.93%
Energy 3.55%
Real estate 2.90%
 
Other
4.64%
Utilities 2.51%
Materials 2.00%
Cash and net other assets 0.13%

The unclassified sector (where applicable) includes exchange traded funds and other securities not able to be classified by sector.

Sectors will vary over time.


Expenses

Expense ratio

Class A Class B Class C Class R Class R6 Class Y
Total expense ratio 1.02% 1.77% 1.77% 1.27% 0.65% 0.77%
What you pay 1.02% 1.77% 1.77% 1.27% 0.65% 0.77%

Sales charge

 Breakpoint Class A Class B Class C Class R Class R6 Class Y
$0-$49,999 5.75% / 5.00% 0.00% / 4.00% 0.00% / 1.00% -- -- --
$50,000-$99,999 4.50% / 3.75% 0.00% / 4.00% 0.00% / 1.00% -- -- --
$100,000-$249,999 3.50% / 2.75% -- 0.00% / 1.00% -- -- --
$250,000-$499,999 2.50% / 2.00% -- 0.00% / 1.00% -- -- --
$500,000-$999,999 2.00% / 1.75% -- 0.00% / 1.00% -- -- --
$1M-$4M 0.00% / 1.00% -- -- -- -- --
$4M-$50M 0.00% / 0.50% -- -- -- -- --
$50M+ 0.00% / 0.25% -- -- -- -- --

CDSC

  Class A (sales for $1,000,000+) Class B Class C Class R Class R6 Class Y
0 to 9 mts. 1.00% 5.00% 1.00% -- -- --
9 to 12 mts. 1.00% 5.00% 1.00% -- -- --
2 yrs. 0.00% 4.00% 0.00% -- -- --
3 yrs. 0.00% 3.00% 0.00% -- -- --
4 yrs. 0.00% 3.00% 0.00% -- -- --
5 yrs. 0.00% 2.00% 0.00% -- -- --
6 yrs. 0.00% 1.00% 0.00% -- -- --
7+ yrs. 0.00% 0.00% 0.00% -- -- --

Trail commissions

  Class A Class B Class C Class R Class R6 Class Y
  0.25% 0.25% 1.00% 0.50% 0.00% 0.00%
  NA NA NA NA NA NA
  NA NA NA NA NA NA

For sales and trail commission information on purchases over $1 million and participant-directed qualified retirement plans, see a Putnam fund prospectus and the statement of additional information.

The Russell 3000 Index is an unmanaged index of the 3,000 largest U.S. companies. You cannot invest directly in an index.

Consider these risks before investing: Investments in small and/or midsize companies increase the risk of greater price fluctuations. Growth stocks may be more susceptible to earnings disappointments, and value stocks may fail to rebound. The value of investments in the fund’s portfolio may fall or fail to rise over extended periods of time for a variety of reasons, including general economic, political or financial market conditions, investor sentiment and market perceptions, government actions, geopolitical events or changes, and factors related to a specific issuer, geography, industry or sector. These and other factors may lead to increased volatility and reduced liquidity in the fund’s portfolio holdings. Our investment techniques, analyses, and judgments may not produce the outcome we intend. The investments we select for the fund may not perform as well as other securities that we do not select for the fund. We, or the fund's other service providers, may experience disruptions or operating errors that could have a negative effect on the fund. You can lose money by investing in the fund.