Invesco Funds Q2 2024 Performance Review: A Comprehensive Analysis

Invesco Rising Dividends Fund Q2 2024 Review

In an environment characterized by high uncertainty and the possibility of more muted or even negative returns, we believe investors will place greater emphasis on companies with stable dividends. Equity market performance diverged in the second quarter. While stocks related to Artificial Intelligence drove several equity indexes to all-time highs, other market segments declined. Stubbornly high inflation sent stocks broadly lower in April amid worries the US Federal Reserve (Fed) might be forced to keep interest rates higher for longer. However, in May and June, stocks rallied in response to signs of cooling inflation. Corporate earnings were generally positive with most S&P 500 (SP500, SPX) constituents beating expectations. As expected, the Fed's June meeting produced no change to the federal funds rate, and meeting minutes suggested the committee anticipates just one rate cut in 2024. Though the market appears to be at a crossroads as investors seemingly try to determine when the Fed will begin to reduce interest rates, the driving principles of our investment process remain rooted in a total return approach that seeks to deliver appreciation, income and preservation over a full market cycle. No matter the backdrop, we focus on companies generating attractive free cash flow and we analyze their drivers and ability to support future dividend growth, as well as balance sheet strength and flexibility. We continue to emphasize the growth and sustainability of a company's dividend because history leads us to believe companies with these characteristics can outperform over a full market cycle. Compared to the Russell 1000 Index, the fund is generally balanced across both sectors and industries, with exposure to areas benefiting from long-term secular growth tailwinds, including ecommerce, electric vehicles, cloud computing, industrial automation, medical technology and broadband. Importantly, our dual focus on companies generating sustainable levels of free cash flow and having healthy balance sheets gives the fund a quality bias and provides defensive characteristics that we believe should prove valuable if market volatility persists in 2024. Alphabet (GOOG,GOOGL) was added to the fund due to improving fundamentals, including operating margins, and a commitment to a multiyear plan to reduce expenses in order to sustain profitable growth. Additionally, the internet search giant has been using AI internally for recommendation engines that suggest content for users, which has been driving better ad revenue and content generation for platforms such as YouTube. Meta (META) was added to the fund during the quarter due to improving cost efficiencies and near-term benefits from generative AI, which has been improving the company's recommendation and ranking engines, leading to better targeted ads and higher click through rates. We believe additional revenue opportunities also exist around improvements to content creation, business messaging and content moderation. PNC Financial (PNC) was a new addition to the fund as we believe management is executing at a high level. Also, the bank has maintained a conservative approach to loan underwriting, which should serve it well if the economy slows and commercial real estate losses continue to climb. Accenture (ACN) is an IT services and consulting company that we removed from the fund due to deteriorating fundamentals; management reduced annual revenue guidance, pointing to weakness in shorter term discretionary projects, elongated sales cycles and re-prioritization of IT budgets. Republic Services (RSG) was removed from the fund in favor of other stocks that we believe offer more upside as Republic Services historically is viewed as a defensive industrial company. Additionally, management didn't raise forward looking guidance, which appeared to disappoint investors. Honeywell (HON) manufactures industrial, aerospace and automation products. Despite its solid quarterly earnings, we exited the position due to slower-than-expected growth in key segments such as industrial automation as businesses are reducing spending amid growing economic uncertainty. Market performance was mixed during the quarter with information technology, communication services and utilities delivering gains while most other sectors were flat or negative. Materials, industrials and energy had the lowest returns for the quarter. In this environment, the fund underperformed the Russell 1000 Index. Stock selection and an underweight allocation in the communication services sector detracted the most. Stock selection in the consumer discretionary and real estate sectors were also headwinds. Conversely, stock selection in the IT, consumer staples, financials and energy sectors contributed the most to relative performance. Nvidia has continued to benefit from strong and growing demand for semiconductor chips, driven by artificial intelligence and machine learning capabilities. The chip maker also completed a stock split during the quarter, which drove the share price even higher. Apple reported quarterly earnings that were in line with analysts' estimates and provided forward looking guidance that was better than expected. iPhone results for the quarter were better than feared due to strong sales in China and services growth. Microsoft was among the top contributors during the quarter. The stock rallied along with the rest of the "Magnificent Seven" (Microsoft, Apple, Nvidia, Alphabet, Amazon, Meta and Tesla), a group of seven mega-cap technology-related stocks that have dominated index performance recently. Microsoft's lead in AI-driven applications has helped to make it a clear beneficiary of the artificial intelligence revolution. Walt Disney (DIS) reported underwhelming financial results. Management provided cautious commentary regarding traffic at its amusement parks and its cruise ship investments, which together in our view will be a near-term headwind to growth of operating income in the segment. Zimmer Biomet (ZBH) reported better-than- expected first quarter results. However, we attribute the stock's underperformance to management guidance that indicated a larger portion of earnings would occur in the second half of the year. This appeared to negatively affect investor sentiment because earnings were expected to be more evenly distributed throughout the year. Lowe's (LOW) share price declined after the company's first quarter earnings report fell short of analysts' expectations. The results showed a decline in diluted earnings-per- share, while total year-over-year sales also fell. The home improvement retailer did show improvements in its professional customer sales and other capabilities.

Invesco Growth And Income Fund Q2 2024 Review

While stocks related to Artificial Intelligence ('AI') continued to rally, driving several equity indexes to all-time highs, other non-AI related areas of the market declined. Most S&P 500 (SP500, SPX) constituents beat earnings expectations, but earnings growth was concentrated, with the "Magnificent 7" stocks (Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA, and Tesla) accounting for most of the gains. As expected, the US Federal Reserve's June meeting produced no change to the federal funds rate. Meeting minutes suggested the committee anticipates just one rate cut in 2024 as inflation has remained higher than its 2% target. Fueled by AI enthusiasm, growth stocks outperformed value. The Russell 1000 Growth Index returned 8.33% and the Russell 1000 Value Index returned -2.17%. Within the Russell 1000 Value Index, only utilities and consumer staples posted gains, while real estate, consumer discretionary and health care had the largest declines. There is a notable valuation gap between the largest mega-cap stocks and the rest of the market, and we believe this creates an advantageous landscape for value conscious investors. We continue to focus on our fundamental work so we can move quickly to take advantage of new opportunities as they become available. Regardless of the economic environment, we seek to invest in companies with attractive valuations and strong fundamentals, qualities we believe will ultimately be reflected in those companies' stock prices. Given that many equity indexes reached record highs, valuation opportunities were limited and portfolio activity was somewhat muted. We purchased new holdings in financials, health care and IT. These purchases were funded by a sale in health care and trimming of some better performing positions. Fidelity National Information Services (FIS): The company is a leading global provider of financial services technology solutions for financial institutions, businesses and developers. The company has lagged its peers in recent years due to numerous acquisitions that increased its debt. However, a new CEO and CFO have made efforts to right size the firm and refocus on its core banking and capital market businesses by selling a partial stake in a recent acquisition. As a result, we believe the company should be able to increase selling opportunities, grow earnings and potentially return capital to shareholders. Microchip Technology (MCHP): The chipmaker has suffered through a demand downturn that by some estimates is worse than the one during the 2008 global financial crisis. However, management estimates the second quarter of 2024 was likely the bottom, so we anticipate an inflection soon. The company has a broad product line that is sold to a diverse set of end markets, customers and channels. Additionally, the company has been deleveraging and has committed to returning capital to shareholders. We believe it will be well positioned when the semiconductor cycle turns positive. United Health Group (UNH): Like many managed care providers, United Health has come under pressure from rising medical costs and higher-than-expected utilization. The stock is currently undervalued based on our analysis. We view the company as a high-quality compounder with secular growth opportunities in the managed care segment. The US Presidential election may cause additional near-term uncertainty, but we believe United Health will be able to rebound once pricing and utilization issues normalize. Universal Health Services (UHS): We sold the position in this hospital operator because many of our original catalysts for the stock were realized and we found better risk/reward opportunities elsewhere. At quarter end, the fund's largest absolute exposures were in financials, industrials and health care. The largest overweights relative to the benchmark were in IT and communication services, while the largest underweights were in consumer staples and real estate. Stock selection in communication services, financials and consumer discretionary added to relative performance during the quarter; several of the fund's largest contributors came from these sectors. Stock selection in the industrials and health care sectors detracted from relative performance during the quarter. Selection and an underweight in consumer staples also hurt relative return as the sector was one of just two index sectors with a positive return for the quarter. Alphabet: Google's parent company was the fund's top overall contributor due to strong quarterly earnings and higher revenues that beat analysts' expectations. Oracle (ORCL): Despite weaker-than-expected earnings, Oracle shares rose after management announced a significant increase in Oracle Cloud Infrastructure (OCI) bookings, including deals with OpenAI, Microsoft and Google. Philip Morris International (PM): The company reported better-than-expected earnings and revenue growth, driven in part by accelerated revenues in its smoke free product line. Bank of America: The bank reported lower net interest income, but non-interest income accelerated. Micron Technology (MU): The chipmaker's high bandwidth memory business continued to benefit from increased demand driven by AI- related spending. Intel (INTC): Shares declined after the semiconductor company reduced its second quarter revenue and earnings guidance. Investors also appeared concerned about the future of its foundry business and lack of AI market share gains. Bristol Myers Squibb (BMY): Despite a generally solid quarter, weaker-than-expected sales of the drugmaker's anti-cancer medication Opdivo sent shares lower. Walt Disney (DIS): The company reported a mixed quarter in which earnings exceeded analysts' estimates, but revenues were weaker than expected. Disney also provided weaker forward guidance due to a slowdown in its theme park business. ConocoPhillips (COP): The company announced its acquisition of Marathon Oil in May. The deal is expected to increase earnings and will increase the scale of Conoco's production assets. However, the stock traded lower on the news. CVS Health (CVS): Shares declined following a weak earnings report. The pharmacy operator also cut its full year earnings forecast due to rising medical costs and higher utilization in its insurance segment.

Invesco American Franchise Fund Q2 2024 Review

We expect the US economy to continue to cool, slowed by the lagging effects of tighter financial conditions, and we believe investor sentiment will favor companies that can compound their growth over the long term. Equity results diverged in the second quarter. Stocks related to AI continued to rally; other market segments declined. First quarter Gross Domestic Product (GDP) growth was below expectations, suggesting to us that the US economy has been finally slowing. Corporate earnings were generally positive, but earnings growth was concentrated, as the "Magnificent 7" stocks (Microsoft, Apple, NVIDIA, Alphabet, Amazon, Meta and Tesla) accounted for most of the gains. The US Federal Reserve's (Fed) June meeting produced no change to the federal funds rate as inflation has remained above the Fed's 2% target. Given the current environment, we have emphasized both higher quality companies with resilient earnings growth and companies that have been winning market share due to industry and technological shifts over cyclical goods and services companies. Rising demand for cloud computing and data management services and increased monetization for AI enablers have supported strong fundamentals for companies in these areas. We believe the greatest opportunity, which is still to come, will be in AI software and services. While economic data has been mixed, we believe slowing economic activity, receding inflation, tight financial conditions and higher debt costs boost the likelihood of Fed easing over time. In our experience, slow-growth economies have been favorable for the type of innovative, organic growth companies emphasized in the fund. The fund's largest overweights include financials, industrials and communication services. We believe financials and industrials stocks are attractive given a potential interest rate peak. Among financials, we favor capital markets and securities exchanges over payment companies and banks. Industrials exposure is focused on electrification, AI-related data center builds and infrastructure stimulus spending. We believe communication services will benefit from ecommerce penetration and streaming media services. Near term, we see AI improving the return on investment for digital advertising and entertainment, along with opportunities for new AI applications and automation. We increased the fund's still-underweight Apple position. The fund remains underweight in IT, largely due to underweights in Apple and Microsoft. The fund's health care weight matches the index as we seek to balance typical election year underperformance with attractive valuation and fundamental opportunities. Microchip Technology (MCHP): This manufacturer of microcontrollers, a basic building block of all things digital, should in our view benefit from a clearing of its inventory. Boston Scientific (BSX): We believe early FDA approval of its Pulsed Field Ablation System should help the company gain substantial market share in a $4 billion industry and help it exceed earnings expectations. Spotify Technology (SPOT): Continued price increases across music distributors confirm to us a healthy competitive structure. Spotify can likely take advantage of strong operating leverage, while podcasts and audiobooks likely offer opportunities for incremental penetration and monetization. Teck Resources (TECK): We believe several catalysts are ahead for this copper producer, including new capacity at its QB2 mine and the announced sale of its coal unit, which will fund share buybacks, special dividends, debt reduction and copper growth projects. Monster Beverage (MNST): US consumption of energy drinks in our view has been disappointing, and Monster Beverages is losing market share. MongoDB (MDB) and Snowflake (SNOW): Software stocks have generally been under pressure as corporate IT departments (and budgets) digest AI implications. Shopify (SHOP): A recently announced plan to spend more on revenue growth projects extended the timeline for our investment thesis. UnitedHealth (UNH): We sold the stock because the managed care weighting in the benchmark was reduced and because we are cautious about headline risk during the upcoming election season. The fund had a positive return for the quarter but underperformed its benchmark, primarily due to stock selection in IT and communication services. Overweights in financials and industrials also hurt relative return, though the effects were offset by positive stock selection in these sectors. Stock selection and an underweight in consumer discretionary added to relative return. NVIDIA completed a 10-for-1 stock split and surpassed $3 trillion in market cap. There appears to be significant excitement for the launch of its Blackwell platform, which will likely power generative AI faster with less cost and energy consumption. Apple introduced Apple Intelligence, which is expected to transform what users can do with iPhones, iPads and Macs. Four years past the pandemic, we believe this is also a sweet spot for the handset upgrade cycle. Alphabet issued its first ever quarterly dividend, widening its investor audience, and saw a surge in earnings and profits, resulting in a new all-time high stock price. Microsoft unveiled a new category of Windows PCs called Copilot+ PCs, which are expected to have the most powerful Neural Processing Units (NPUs), up to 20x more powerful and up to 100x more efficient for running AI workloads. Amazon.com reported continued strong ecommerce results that helped push its market cap over $2 trillion for the first time. Amazon's stake in Rivian Automotive got a boost from an announced joint venture with Volkswagen. MongoDB (MDB) suffered as software stocks took a backseat to AI-related stocks. Advanced Micro Devices (AMD) issued a higher full year revenue outlook, but investors appeared to expect an even higher revision given increased demand for its Graphics Processing Units (GPUs) employed in AI data centers. DexCom (DXCM) declined as the stock of this continuous glucose monitoring device company experienced sentiment-driven moves. Investors appeared to worry the addition of sales team members would be disruptive. Additionally, we believe investors overreacted to another company's positive results for a type 1 diabetes trial. Visa (V) was hurt by lower inflation, as its fees are a percentage of purchase amounts, and by an ongoing dispute about interchange or "swipe" fees charged between banks for processing credit card payments. Lowe's (LOW) was hampered by high interest rates, though earnings for the coming quarter appear to be trending in line with analysts' expectations.

Invesco International Small-Mid Company Fund Q2 2024 Review

We will continue to practice our time-tested discipline: seeking to invest in consistently profitable companies with high internal rates of return on their capital, that fund operations through internal cash flow without the need for bank financing, and that have strong balance sheets. Equity markets opened the second quarter with a correction, giving back much of the previous quarter's gain. However, after bottoming in mid-April, the US and emerging markets recovered lost ground and advanced further while developed non-US equities lagged. As in recent quarters, attention centered on the US Federal Reserve (Fed) and the outlook for US interest rate policy. Fed guidance signaled only one rate cut this year and not before September "at the earliest." Equities rose after the news, which we believe shows valuations have been adjusted for higher capital costs. However, we think the variable effect of higher capital costs on corporate earnings and returns is what matters going forward. The fund underperformed for the quarter primarily due to recent spending patterns in IT and health care. Spending on software and IT consulting has slowed while companies have continued to formulate AI strategies. Once strategies are in place, we anticipate activity will pick up for IT consultants that help companies execute them. In health care, the growth pattern of many equipment and consumable suppliers has been disrupted: first boosted by a COVID-induced demand spike and now slowed by clients' need to work off overstocked inventory. While this has caused volatility in quarter-to-quarter returns and share price movements, we believe the underlying secular growth trends supporting these companies remain in place. Our high conviction, low turnover portfolio has a consistent structure that changes little from quarter to quarter. We are benchmark independent, bottom-up investors, focusing on company fundamentals rather than using a "top-down" perspective to overweight or underweight any sector or region. We seek companies supported by structural growth trends in the global economy; that have significant pricing power; can fund operations and growth with operating cash flow; and have strong balance sheets. We find the bulk of our targets in the industrials, health care and IT sectors. We historically tend to avoid the utilities and real estate sectors, which are viewed as bond proxies, and sectors with many industries whose products are commoditized, such as energy and materials. We added three new positions during the quarter. Carel Industries is an Italian designer, manufacturer and distributor of HVAC and refrigeration systems. We believe it has leading positions in the market for "clean" refrigerants. We find Carel's business model, operating margins, capital returns, prospects and valuation attractive. Coway is a Korea-based company with a door-to-door distribution model for air and water filtering and purification. Its after-sales services provide a high portion of revenues. In our opinion, Coway's track record for return on invested capital is attractive. Park Systems, based in South Korea, is the market share leader in atomic force microscopes (AFMs), sold primarily to the semiconductor industry. As semiconductor chip sizes have shrunk, demand for AFMs has risen because conventional electronic microscopes cannot scan nodes smaller than 20 nanometers (a nanometer is about the size of an atom). In our opinion, Park Systems is well-placed to benefit from the continuing miniaturization trend in semiconductors. We exited one position. New Work (OTCPK:XINXF), based in Germany, operates Xing, a professional social-media platform comparable to LinkedIn, and Kununu, a workplace-review platform comparable to Glassdoor. Dominance of these platforms in German-speaking markets attracted us to the company. In the process of transforming its social networks to business recruiting tools, New Work began shifting to a subscription business model. As we have seen with every other internet platform/software company that made this transition, profits initially softened. The share price declined. During the quarter, New Work's 70% majority owner bought the remainder of the shares, taking the company private. The fund outperformed most in the consumer discretionary sector due to stock selection and its underweight position, and in the real estate sector due to the usual underweight position. The fund underperformed in the health care, IT and materials sectors, all due to stock selection. Alpha Financial Markets, based in the UK, provides consulting services to the asset management business. During the quarter, Alpha Financial received an all-cash takeover bid from private equity firm Bridgepoint and the shares rose close to the offer price. Sdiptech (OTC:SDTHF), a Swedish company, provides public infrastructure control systems for water treatment, transportation, building climate control and security. During the quarter Sdiptech announced earnings that exceeded analysts' forecasts. Restore is a UK-based document storage and management company, much like Iron Mountain (not a fund holding) in the US. During the quarter, the share price reacted favorably to the company's release of revenue and guidance numbers. MISUMI (OTCPK:MSUXF), based in Japan, distributes precision machine parts to specialized industries such as hospitals and restaurants and to manufacturers. Its customers appear more sensitive to reliability and delivery speed than price. The company reported earnings and provided guidance during the quarter and the share price reacted favorably. Mips (OTCPK:MPZAF), based in Sweden, is the world's leading supplier of interior safety systems for sports helmets. It has established a recognizable brand among end users, much as Intel did with "Intel Inside." During the quarter, Mips raised its earnings guidance. Carl Zeiss, based in Germany and the global leader in ophthalmic surgery lenses, has been supported by an aging world population and increasing access to health care in emerging markets. That said, shorter term sales volumes have slowed in the aftermath of COVID-related overstocking by customers. During the quarter, management issued a profit warning. NICE produces software to optimize call centers and customer service. The CEO announced he would be stepping down. After examining the issue thoroughly, we are comfortable that the business is fine, and he simply wants to take on new challenges. Sartorius, based in Germany, is a leading maker of precision equipment and components for research and production in the biologic drug industry. Sartorius' sales have slowed after an above-trend period. In our opinion, the company's clients are working off inventory. Bruker (BRKR), arguably the market leader in spectrometers, primarily for drug developers and researchers, is another supplier for whom inventory de-stocking has suppressed recent profit growth. ChemoMetec (OTCPK:CHHMF), based in Denmark provides cell counters for life science research. In a pattern familiar to us, post-COVID destocking has suppressed near-term growth.

Invesco Discovery Fund Q2 2024 Review

Technology-driven innovation has continued to disrupt large portions of the global economy, providing opportunity through investment in growth compounders. We remain focused on capturing those opportunities for the fund's shareholders. Invesco Growth Team has a constructive outlook for the stock market in 2024. The US economy has continued to expand, inflation has been moderating, the Fed is forecasting interest rate reductions and corporate profits have been rising. Meanwhile, technology-driven innovation has continued to create opportunities for wealth creation. Keeping these factors in mind, we remain focused on investing in shares of reasonably valued companies judged to have superior relative growth potential. The annual rebalancing of the Russell indexes occurred at the end of the second quarter. Changes to the Russell 2000 Growth Index were meaningful as its health care weighting increased by more than 3% and its IT weighting declined by more than 4%. At the end of the second quarter, the fund's largest overweights relative to its benchmark were in consumer discretionary and financials, while the fund had underweights in communication services and consumer staples. The fund had no exposure in the smallest benchmark sector, utilities. At the security level, we added and removed several stocks to reflect our preferred positioning and to upgrade the portfolio. SPX Technologies (SPXC) supplies engineered products and technologies, with market positions in heating, ventilation and air conditioning ('HVAC'). We bought the stock because the company is historically a steady compounder in the HVAC business. Coherent (COHR) designs engineered materials and optoelectronic components. We believe the company will benefit from spending on artificial intelligence ('AI') and wafer fabrication ('FAB') equipment. FormFactor (FORM) designs, develops and manufactures advanced semiconductor wafer probe cards. We believe the company will benefit from spending on AI and wafer fab equipment. GitLab (GTLB) designs and develops software solutions. The diversion of IT budgets from software to AI is a negative for this company. Additionally, enterprises have been consolidating the number of software applications due to price inflation. Lattice Semiconductor (LSCC) designs, develops and markets programmable logic devices. We sold the fund's position due to the departure of its CEO who left for Coherent. Silicon Laboratories (SLAB) is a semiconductor company. We sold this position to consolidate the fund's semiconductor positions around companies that historically benefit from AI and wafer fab equipment spending. After a positive start to 2024, the fund outperformed its benchmark, the Russell 2000 Growth Index, in the second quarter. Performance was driven primarily by stock selection. Strength in IT, consumer discretionary and health care was partially offset by weakness in industrials and consumer staples. The largest contributors to absolute return for the quarter were TransMedics (TMDX), Carpenter (CRS) and Nova (NOVA). TransMedics offers transplant therapy for end-stage organ failure patients across multiple diseases. Management reported strong quarterly results and raised 2024 guidance above consensus expectations. The company has been helping to increase the size of the US transplant market as it has delivered more donor organs to recipients faster with its unique service offering. Carpenter manufactures, fabricates and distributes stainless steels, titanium and specialty metal alloys. Management accelerated its guidance for long-term fiscal 2027 EPS (earnings per share) by a full year. Management also reported quarterly earnings that beat analysts' expectations and raised guidance for fiscal year 2024. Nova provides integrated monitoring and process control systems for other integrated circuit manufacturing processes. Wafer fab spending has been on the rise due to high memory prices and AI spending, resulting in strong earnings results for Nova. The largest detractors from absolute return for the quarter were Saia (SAIA), Sprout Social (SPT) and H&E Equipment Services (HEES). Saia is a multi-regional and inter-regional less-than-truckload ('LTL') carrier. During the quarter, management reported earnings that fell short of analysts' estimates and provided a weaker forward view on freight activity. Sprout Social provides online social media management tools for businesses. Management reported lackluster quarterly results due to slowing software spending. H&E Equipment Services is an equipment rental company. The stock underperformed following its first quarter report. Though revenue and EBITDA (earnings before interest, taxes, depreciation and amortization) exceeded consensus estimates, profit margin fell short of expectations. More importantly, management reduced full year capital expenditure guidance as the company is seeing slowing in the general construction rental market.

Invesco Charter Fund Q2 2024 Review

The S&P 500 Index (SP500, SPX) returned 4.28% in the second quarter as larger cap growth stocks, mainly related to Artificial Intelligence ('AI'), rallied while other market segments declined. IT, communication services and utilities had gains; most other sectors were flat or negative. Equity performance diverged in the second quarter as stocks related to AI continued to rally, while other market segments declined. The S&P 500 Index returned 4.28% with IT, communication services and utilities delivering gains while most other sectors were flat or negative. Materials, industrials and energy had the lowest returns for the quarter. Stubbornly high inflation sent stocks broadly lower in April amid worries the US Federal Reserve (Fed) might be forced to keep interest rates higher for longer. However, in May and June, stocks rallied in response to evidence of cooling inflation. Consumer Price Index (CPI) and Gross Domestic Product (GDP) data both came in below expectations, suggesting to us the US economy was finally slowing. Nonfarm payrolls also appeared to moderate and the unemployment rate was largely unchanged at 4.0%. As expected, the Fed's June meeting produced no change to the federal funds rate, and meeting minutes suggested the committee anticipates just one rate cut in 2024 as inflation has remained higher than its 2% target. Regardless of market sentiment and near-term economic trends, our investment process favors better-managed companies with strong balance sheets and competitive positioning. We seek to outperform through stock selection while minimizing any top-down macro, factor and sector exposures relative to the index. We maintain our valuation discipline and our focus on companies with competitive advantages and skilled management teams that we believe are executing better than their peers. These companies historically tend to have higher profit margins and returns on invested capital, rising market shares and consistently strong pricing power. As of quarter end, all sector weights were within +/- 3% of the Russell 1000 Index. The largest additions to the fund during the quarter included the following companies: Sanofi (SNY) is a leading pharmaceutical and health care company that has benefited from a strong demand pipeline and an attractive pricing outlook for its products. PPL (PPL) is in our view a well-positioned utility with a healthy balance sheet relative to its peers and stands to benefit from data center growth in its service area. MongoDB (MDB) is a next generation provider for AI-driven databases, and we expect the company to evolve into a tollkeeper in that space over time. The largest positions sold during the quarter included the following companies: Autodesk (ADSK) has faced scrutiny about its accounting practices. We sold it to invest in other stocks in the IT sector that we believe have better risk-reward profiles. WEC Energy (WEC) faces uncertainty about upcoming court decisions that could affect rates and disallow already incurred capital expenditures. We sold the company in favor of other utilities companies. Gilead Sciences (GILD) was sold because of increased competition in its products and disappointing trial data for its lung cancer drug, Trodelvy. Amdocs (DOX) has seen its organic growth stall as some discretionary projects have been delayed and key clients appear to have kept their budgets tight. Tesla involves substantial near-term risks related to global demand and trade challenges. Meanwhile, upcoming new products may have lower gross profit margins and potential future revenue sources like robotaxi services may take years to develop. The fund's Class A shares (MUTF:CHTRX) at net asset value (NAV) returned 3.65% for the quarter, outperforming the Russell 1000 Index, which returned 3.57%. The fund's outperformance mainly resulted from stock selection in IT, health care and financials. Weaker stock selection in communication services, consumer discretionary and real estate partially offset these results. NVIDIA reported another strong quarter and commented that AI-related demand should remain durable for the foreseeable future given the backlog of existing products and upcoming launches of new products. Dell Technologies (DELL) outperformed as it has had rapid growth in its AI server business due to continued demand for AI-optimized servers. Dell is in our view well-positioned to benefit from continued growth, including from its large enterprise customer base. Dell has reported a strong order backlog and AI leaders like NVIDIA have confirmed sustained GPU (graphics processing unit) demand. Applied Materials (AMAT) continued to see solid demand and provided a positive outlook as China-related concerns appear to have eased. Semiconductor end-market spending appears to have bottomed, and investors appear to be now looking for a resumption in wafer fab equipment spending, potentially leading to a resumption in revenue and earnings-per-share ('EPS') growth. Zimmer Biomet (ZBH) reported first quarter earnings that exceeded analysts' expectations, but investors appeared disappointed with results in its core business of hip and knee replacements. The company also announced a distribution agreement for a miniature robotic system used in ambulatory surgery centers, which some investors appeared to view as moving away from its existing robotic platform. MongoDB (MDB) reported disappointing results as both new customer additions and growth within its installed base had slower starts for its fiscal year. The pressure appeared to be macroeconomic related, similar to commentary from multiple software vendors. LKQ (LKQ), a leading auto parts distributor, underperformed as a period of lower collision volumes affected revenue and earnings, while the company also dealt with elevated costs due to a German labor strike that required workarounds to serve customers.

Invesco Oppenheimer International Growth Fund Q2 2024 Review

The variable effect of those costs on corporate earnings and returns is what we believe will increasingly matter. Key takeaways The fund underperformed its benchmark this quarterClass A shares at net asset value (NAV) declined during the quarter while the MSCI ACWI ex-US Index's posted a gain. Corporate debt cost likely to riseAs corporate debt borrowed at cheap interest rates matures over the next few years, companies will have to roll over that debt at more expensive levels. We are comforted that companies in the fund finance their growth from operating cash flow and do not rely on debt. We focus on the return on the fund's invested capitalWe continue to judge companies based on their capital return track record and our opinion of their future potential. Manager perspective and outlook Equity markets opened the second quarter with a correction, giving back much of the gain they had made in the previous quarter. However, after bottoming in mid-April, the US and emerging markets regained all of the lost ground and advanced further while developed non- US equities lagged. As in previous quarters, attention centered on the US Federal Reserve (Fed) and the outlook for US interest rate policy. Fed guidance signaled only one rate cut this year, and not before September "at the earliest." To the surprise of many, equity markets rose following the announcement. In our opinion, this is evidence that valuations have largely been adjusted for the reality of higher capital costs. The variable effect of those costs on corporate earnings and returns is what we believe will increasingly matter. We continue to judge companies based on their capital return track record and our opinion of their future potential. We invest in companies we believe are on the growth side of secular trends, are able to monetize those trends profitably and consistently for many years, and are able to fund their growth from their own cash flow rather than needing debt funding. Portfolio positioning We initiated three new positions during the quarter. MonotaRO (OTCPK:MONOY) distributes machine tools, engine parts and factory consumables in Japan. It operates in a fragmented market, with fragmented sets of customers and suppliers, selling small average order value products to customers wanting near instantaneous availability. Monotaro's one-stop-shop offers the market's largest product catalogue and 24-hour delivery. In our opinion, the pricing power conferred on Monotaro by its market position is likely to continue. BAE (OTCPK:BAESF) is a UK-based defense contractor supplying predominantly NATO clients. In response to increasing security threats, Allied defense spending has been rising and is likely to continue rising for some time. In our opinion, BAE is well-placed to benefit from this trend, given its diversified portfolio of equipment and services. AstraZeneca (AZN) is a UK-based pharmaceutical firm. We like its drug portfolio, research and development capabilities, and oncology platform. We exited four positions during the quarter. Barry Callebaut (OTCPK:BYCBF) manufactures cocoa and chocolate products and is based - of course! - in Switzerland. Since we invested over 10 years ago, it has been one of the fund's "Steady Eddie" performers. However, we believe future growth would need to come from a significantly larger base than when we first invested. We saw more attractive growth opportunities elsewhere. Campari (OTCPK:DVDCF), an Italian beverage company known for its namesake liqueur, produces and markets more than 50 spirits, wine and soft drink brands globally. We bought the stock when the price plummeted during the COVID decline in 2020, after which the company had significant sales growth. Sales have recently slowed, and we saw better investment opportunities elsewhere. HelloFresh (OTCPK:HLFFF), born in Germany, is the largest meal kit provider in the US and several other markets. Though we believe it is the one meal kit company with the scale to achieve attractive profitability, management has been taking longer to execute its growth plans than we expected when valuing the company. Therefore, we exited the position. Legal & General (OTCPK:LGGNY), a UK-based insurer, provides pension administration and management services to corporations. We believe an expansion in the UK Regulator's purview to include involvement in investing decisions is potentially negative for future returns, so we exited the position. Top issuers (% of total net assets) Fund Index Novo Nordisk A/S (NVO) 6.06 1.81 ASML Holding NV (ASML) 4.02 1.59 Reliance Industries Ltd 3.79 0.44 Dollarama Inc (OTCPK:DLMAF) 3.38 0.10 London Stock Exchange Group PLC (OTCPK:LDNXF) 3.01 0.21 Epiroc AB (OTCPK:EPOKY) 2.85 0.08 Compass Group PLC (OTCPK:CMPGF) 2.69 0.18 Next PLC (OTCPK:NXGPF) 2.68 0.05 Atlas Copco AB (OTCPK:ATLKY) 2.63 0.29 Hermes International SCA (OTCPK:HESAY) 2.58 0.28 As of 06/30/24. Holdings are subject to change and are not buy/sell recommendations. Click to enlarge Sector breakdown (% of total net assets) Top countries (% of total net assets) Performance highlights The fund outperformed most in the industrials sector due to stock selection, and in energy and real estate due to its usual underweights in those sectors. The fund underperformed most in the information technology sector due to stock selection, in the consumer discretionary sector due to the overweight position, and in financials due to both stock selection and the usual underweight position. Contributors to performance Novo Nordisk in Denmark is the world's leading maker of care products and insulin for diabetes. Novo has also introduced weight loss drug Wegovy. Clinical trial results for Wegovy's reduction of coronary disease risk have exceeded expectations. Dollarama, a Canada-based discount retailer, is part of our "Reorganization of Retail" theme. We believe the shift to online buying benefits retailers at the very high and low ends of the pricing spectrum. Hitachi (OTCPK:HTHIY) in Japan has been restructuring itself to provide a higher return on capital. Those efforts have been bearing fruit. ASM, a Dutch company, makes equipment used in semiconductor production. ASM's leading product is atomic layer deposition equipment, which delivers 50% of the company's revenue on a 50% world market share. We believe ASM is well placed to benefit as demand for layered semiconductors rises. Taiwan Semiconductor Manufacturing Co. (TSM) is a leading semiconductor foundry, particularly in chips that are seven nanometers and smaller - a nanometer is about the size of an atom. During the quarter, TSMC announced plans to expand capacity. Detractors from performance EPAM (EPAM) offers businesses a wide range of IT services. During the quarter, EPAM lowered its guidance and the share price reacted unfavorably. We think EPAM is likely to benefit from the rising demand we anticipate for IT consulting as companies strive to take advantage of AI. Sartorius Stedim (OTCPK:SDMHF), a French company, provides specialized equipment and supplies for biologic drug production and research. Sales have slowed after a period of above- trend growth; in our opinion, this is due to inventory destocking. LVMH (OTCPK:LVMHF), a French luxury brand owner and manager, is one of the best in the business, in our opinion. Luxury stocks have been volatile after rising repeatedly to new highs over the past few years. This quarter, concerns about a potential slowdown in spending caused investors to take profits. James Hardie (JHX), is an Australia-based global manufacturer of Hardie Plank, a fiber cement siding, and a stucco substitute. Earnings announced during the quarter fell short of management's guidance. Longer term, we view James Hardie favorably given the housing shortage in most developed markets. Airbus (OTCPK:EADSF) has benefited from steadily rising demand for air travel and its strong market position. During the quarter, Airbus announced it will lower its plane delivery target for this year due to supplier issues. Top contributors (%) Issuer Return Contrib. to return Novo Nordisk A/S 13.26 0.72 Dollarama Inc. 19.81 0.56 Hitachi Ltd. 22.56 0.34 ASM International N.V. 25.69 0.34 Taiwan Semiconductor Manufacturing Company Limited 22.18 0.30 Click to enlarge Top detractors (%) Issuer Return Contrib. to return EPAM Systems, Inc. -31.88 -0.58 Sartorius Stedim Biotech S.A. -41.91 -0.56 LVMH Moet Hennessy Louis Vuitton SE -13.87 -0.46 James Hardie Industries plc -21.41 -0.41 Airbus SE -24.14 -0.37 Click to enlarge Standardized performance (%) as of June 30, 2024 Quarter YTD 1 Year 3 Years 5 Years 10 Years Since inception Class A shares (MUTF:OIGAX) inception: 03/25/96 NAV -1.73 2.70 7.40 -2.30 5.79 3.83 7.26 Max. Load 5.5% -7.13 -2.95 1.48 -4.13 4.60 3.24 7.05 Class R6 shares (MUTF:OIGIX) inception: 03/29/12 NAV -1.64 2.89 7.81 -1.92 6.21 4.26 6.34 Class Y shares (MUTF:OIGYX) inception: 09/07/05 NAV -1.69 2.83 7.65 -2.07 6.05 4.08 6.31 MSCI ACWI ex USA Index ('USD') 0.96 5.69 11.62 0.46 5.55 3.84 - Total return ranking vs. Morningstar Foreign Large Growth category (Class A shares at NAV) - - 69% (266 of 398) 53% (185 of 383) 57% (166 of 334) 83% (185 of 224) - Click to enlarge Expense ratios per the current prospectus: Class A: Net: 1.10%, Total: 1.10%; Class R6: Net: 0.73%, Total: 0.73%; Class Y: Net: 0.86%, Total: 0.86%. Performance quoted is past performance and cannot guarantee comparable future results; current performance may be lower or higher. Visit Country Splash for the most recent month-end performance. Performance figures reflect reinvested distributions and changes in net asset value (NAV). Investment return and principal value will vary so that you may have a gain or a loss when you sell shares. Returns less than one year are cumulative; all others are annualized. As the result of a reorganization on May 24, 2019, the returns of the fund for periods on or prior to May 24, 2019 reflect performance of the Oppenheimer predecessor fund. Share class returns will differ from the predecessor fund due to a change in expenses and sales charges. Index source: RIMES Technologies Corp. Had fees not been waived and/or expenses reimbursed in the past, returns would have been lower. Performance shown at NAV does not include the applicable front-end sales charge, which would have reduced the performance. Class Y and R6 shares have no sales charge; therefore performance is at NAV. Class Y shares are available only to certain investors. Class R6 shares are closed to most investors. Please see the prospectus for more details. For more information, including prospectus and factsheet, please visit Invesco.com/OIGAX Not a Deposit Not FDIC Insured Not Guaranteed by the Bank May Lose Value Not Insured by any Federal Government Agency Click to enlarge Original Post Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors. Select quarterly fund letters.