Waddell & Reed

Quarterly Fund Commentary

WRA Accumulative Fund (prospectus)
June 30, 2015

Barry M. Ogden, CFA , CPA

Market Sector Update

  • Albeit by the thinnest of margins, the S&P Index eked out another positive return for investors during 2Q 2015, even though at times it looked probable the string of consecutive positive returns for the market was going to end. This now marks the 10th straight quarter, and 25th of the past 29 quarters, that the index has had a positive return.
  • With another earning season right around the quarter, we think expectations have been fairly tempered with the continued strength in the dollar, a slight improving economy in parts of Europe and the never ending uncertainty of what will become of Greece and what if any collateral damage that might cause. Our guess is management teams may take this opportunity to again temper expectations for the second half and blame it on the stronger dollar.

Portfolio Strategy

  • The Fund outperformed its S&P 500 Index benchmark during the quarter, before the effects of sales charges. We were fully invested throughout most of the quarter, and finished the quarter with less than 2% cash on the sidelines.
  • The quarter saw some strong performances for Starbucks (2.4% of net assets as of 06/30/2015), which has been a bellwether, core holding for the Fund for some time now, and it’s been the right decision as the company continues to defy the law of large numbers as they continue to expand both domestically and around the world.
  • Another solid contributor during the quarter was Walt Disney (2.0% of net assets as of 06/30/2015), a welldiversified, fully integrated media behemoth that owns and operates some of the world’s best and brightest brands. ESPN continues to perform better than its peers and the company is coming off the “Frozen” whirlwind.
  • Strong sectors during the quarter were health care, financials and consumer discretionary and we were able to capitalize on all three of these sectors. Laggards during the quarter were utilities, industrials, energy and consumer staples. Fortunately, the Fund was significantly underweight each of these sectors, except for consumer staples, where it had a modest overweight position.


  • Overall, we think the backdrop looks pretty good for U.S. equities.
  • It now appears that much of 1Q 2015 real gross domestic product (GDP) data disappointment was due to weather and port-impacted issues, rather than a true demand-driven situation. Seasonal adjustments seem to be lagging the actual trends of late and it feels like we’re running somewhere between a 2-3% real GDP environment.
  • There appears to be an opportunity for the Federal Reserve (Fed) to raise interest rates sometime before the end of 2015, although Chairwomen Janet Yellen has made it abundantly clear that the Fed is in no hurry to raise rates too far or too fast. Lower for longer has been our working assumption and we think it still applies.
  • The labor markets continue to chug along at almost a “Goldilocks” type of an environment – not too hot and not too cold. We also think this situation should help support consumer spending trends.
  • For the time being, we intend to play the hand we’ve been dealt by the current economic environment, and seek to maximize the potential returns for the Fund and our shareholders until the cards are reshuffled or the game ends. Stay tuned.

The opinions expressed in this commentary are those of the Fund’s manager and are current through June 30, 2015. The manager’s views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed. Past performance is no guarantee of future results.

The S&P 500® Index is composed of 500 selected common stocks chosen for market size, liquidity, and industry grouping, among other factors. 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. 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.

Investors should consider the investment objectives, risks, charges and expenses of a fund carefully before investing. For a prospectus, or if available, a summary prospectus, containing this and other information for the mutual funds offered by Waddell & Reed, call your financial advisor or visit us online at www.waddell.com. Please read the prospectus or summary prospectus carefully before investing.

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