MW Block out the noise and stay invested: Stock picks and advice from one of the world's oldest mutual funds.

By Barbara Kollmeyer

The Investment Company of America looks for dividend players

Since its 1934 launch, Capital Group's $200 billion-plus The Investment Company of America fund has rolled with the changes.

From a manufacturing-based post World War II economy to a services one in the 1980s, and from old to new economy, the fund "has evolved alongside the U.S. economic landscape," Anita Patel, an investment director and public face of the strategy that uses a team of eight fund managers, told MarketWatch in an interview.

The fund has a "long track record of protecting in periods of market volatility and market declines," Patel said. The five-star Morningstar rated fund AIVSX is ahead of the S&P 500 this year and over three and five years, according to Lipper data.

The portfolio is filled with "well-established U.S. companies with growth and income characteristics from a wide cross section of the economy," said Patel.

Some 80% of the fund is invested in dividend payers, their sweet spot that she says offers proof of good capital discipline.

As for the bumpy 2025 so far? "We're looking to find long-term winners within the investment universe, within the U.S., so this is just noise at the moment," said Patel, who advises clients to "stay invested, don't try to time the market, take a very long-term perspective."

The fund is overweight industrials, with an eye on commercial aviation and aircraft engine manufacturer GE Aerospace $(GE)$, given post-COVID air travel recovery has driven demand for planes.

"Leading aircraft manufacturers cannot fill that gap, so there's a slowdown in manufacturing of these new aircrafts and the demand for aircrafts is so high, so there's a big gap," she said.

"They're benefiting from strong aftermarket revenues, because the aircraft manufacturers are just not manufacturing the planes quick enough, and that adds resilience to GE's revenues, because those aftermarket revenues are recurring" and resilient, said Patel.

Building products companies like Carrier Global $(CARR)$ is another industrials company the fund holds. "They incorporate technology within their [heating, ventilation and air conditioning] systems to make them energy efficient, so they're going to benefit from the shift toward decarbonization, and also because about 40% of a building's greenhouse gas emissions come from HVAC systems," she said.

As for another overweight, Abbott Laboratories $(ABT)$, one of the fund's oldest holdings, is a medtech and diagnostic company "exposed to the fastest-growing segments within healthcare, which is diabetes and heart valves," said Patel, who adds that it also hasn't cut its dividend in 50 years.

"So there's all this technology and the markets are just not reflecting the full potential of innovation that's going on with the sector," she said.

The fund's biggest holding is Microsoft $(MSFT)$, which it has owned since 1993. She said they were impressed when they met CEO Satya Nadella after the leadership transition, as they could see the "direction of the growth potential of the company."

"And today if you look at the company, it's a leader in software, cloud computing and actually artificial intelligence through its partnership with OpenAI. It really has a strong competitive position, it's got a diversified revenue mix and it's got a recurring subscription model through its Office 365 products and its cloud computing products," and has increased dividends for the last 20 years, she said.

When it comes to AI, the fund is"very selective," about exposure, but she says Microsoft offers a way in through OpenAI link, while Carrier Global is a play on the materials big AI data centers will need to get built.

A relative newcomer to the fund, Uber $(UBER)$ was purchased in 2023, and they like it because it connects riders with drivers, but she said they're less keen on Tesla, which has a "very capital intensive" business.

"To break even and make a profit you need to utilize or increase the utilization rate of these driverless cars," and the best way to do that is putting it in the biggest marketplace, such as Uber that connects drivers to drivers, said Patel.

Tesla $(TSLA)$ is a "very very small position" in the fund - it's volatile and managers see better opportunities elsewhere, she said.

Patel said the market is broadening, and many investors may not be seeing that. "There are a number of sectors and industries that are doing much better than tech," she said.

-Barbara Kollmeyer

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

June 19, 2025 09:07 ET (13:07 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.