Back to top

Image: Bigstock

Is Vanguard Equity Income Admiral (VEIRX) a Strong Mutual Fund Pick Right Now?

Read MoreHide Full Article

If you have been looking for Large Cap Value funds, a place to start could be Vanguard Equity Income Admiral (VEIRX - Free Report) . VEIRX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

Large Cap Value mutual funds invest in stocks with a market capitalization of $10 billion or more, but whose share prices do not reflect their intrinsic value; this value investing strategy often leads to low P/E ratios and high dividend yields, though growth levels are often curtailed. The high-growth opportunity of these funds are slowed even further, as large-cap securities are generally in stable industries with low to moderate growth prospects. Therefore, Large Cap Value funds are usually more appealing to investors who are interested in a stable income stream.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VEIRX. Vanguard Equity Income Admiral made its debut in August of 2001, and since then, VEIRX has accumulated about $30.08 billion in assets, per the most up-to-date date available. A team of investment professionals is the fund's current manager.

Performance

Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 7.58%, and is in the top third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 5.12%, 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. Over the past three years, VEIRX's standard deviation comes in at 16%, compared to the category average of 16.04%. Over the past 5 years, the standard deviation of the fund is 13.83% compared to the category average of 14.13%. This makes the fund less volatile than its peers over the past half-decade.

Risk Factors

Investors should note that the fund has a 5-year beta of 0.9, so it is likely going to be 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. VEIRX's 5-year performance has produced a negative alpha of -2.56, which means managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Holdings

Investigating 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 principally on equities that are traded in the United States.

Currently, this mutual fund is holding 97.41% stock in stocks, with an average market capitalization of $121.34 billion. The fund has the heaviest exposure to the following market sectors:

  1. Finance
  2. Non-Durable
  3. Technology
  4. Health
  5. Industrial Cyclical
With turnover at about 38%, this fund makes fewer trades than comparable funds.

Expenses

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, VEIRX is a no load fund. It has an expense ratio of 0.19% compared to the category average of 1%. Looking at the fund from a cost perspective, VEIRX is actually cheaper than its peers.

Investors should also note that the minimum initial investment for the product is $50,000 and that each subsequent investment needs to be at $1.

Bottom Line

Overall, Vanguard Equity Income Admiral ( VEIRX ) 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 VEIRX too for additional information. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Vanguard Equity Income Adm (VEIRX) - free report >>

Published in