There are plenty of choices in the Large Cap Value category, but where should you start your research? Well, one fund that might be worth investigating is American Funds Mutual Fund A (AMRMX). AMRMX has a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.
AMRMX is classified in the Large Cap Value segment by Zacks, which is an area full of possibilities. Investors interested in a stable income stream fund these mutual funds very appealing because they have a unique investing strategy. Large Cap Value funds invest in stocks with a market capitalization of $10 billion or more, but whose share prices do not reflect their intrinsic value. This tactic often leads to low P/E ratios and high dividend yields; however, these funds’high growth opportunity are often slowed, as large-cap securities are generally in stable industries with low to moderate growth prospects.
History of Fund/Manager
American Funds is based in Los Angeles, CA, and is the manager of AMRMX. American Funds Mutual Fund A made its debut in February of 1950, and since then, AMRMX has accumulated about $25.90 billion in assets, per the most up-to-date date available. The fund’s current manager is a team of investment professionals.
Investors naturally seek funds with strong performance. AMRMX has a 5-year annualized total return of 9.99% and it sits in the top third among its category peers. If you’re interested in shorter time frames, do not dismiss looking at the fund’s 3-year annualized total return of 7.31%, which places it in the top third during this time-frame.
When looking at a fund’s performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. AMRMX’s standard deviation over the past three years is 14.53% compared to the category average of 14.34%. Over the past 5 years, the standard deviation of the fund is 12.06% compared to the category average of 12.31%. This makes the fund less volatile than its peers over the past half-decade.
The fund has a 5-year beta of 0.77, so investors should note that it is hypothetically less volatile than the market at large. Because alpha represents a portfolio’s performance on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, one should pay attention to this metric as well. The fund has produced a negative alpha over the past 5 years of -0.94, which shows that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
Exploring the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is largely on equities that are traded in the United States.
The mutual fund currently has 86.2% of its holdings in stocks, which have an average market capitalization of $211.38 billion. The fund has the heaviest exposure to the following market sectors:
- Industrial Cyclical
Turnover is 30%, which means this fund makes fewer trades than the average comparable fund.
For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, AMRMX is a load fund. It has an expense ratio of 0.60% compared to the category average of 0.99%. Looking at the fund from a cost perspective, AMRMX is actually cheaper than its peers.
While the minimum initial investment for the product is $250, investors should also note that each subsequent investment needs to be at least $50.
Overall, American Funds Mutual Fund A ( AMRMX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.
For additional information on the Large Cap Value area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into AMRMX too for additional information. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.