We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Is T. Rowe Price Equity Income Fund (PRFDX) a Strong Mutual Fund Pick Right Now?
Read MoreHide Full Article
Having trouble finding a Large Cap Value fund? T. Rowe Price Equity Income Fund (PRFDX - Free Report) is a potential starting point. PRFDX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
PRFDX 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
PRFDX finds itself in the T. Rowe Price family, based out of Baltimore, MD. Since T. Rowe Price Equity Income Fund made its debut in October of 1985, PRFDX has garnered more than $14.25 billion in assets. The fund's current manager, John Linehan, has been in charge of the fund since November of 2015.
Performance
Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 12.21%, and it sits in the middle 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 10.5%, which places it in the middle 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, PRFDX's standard deviation comes in at 20.92%, compared to the category average of 16.19%. Over the past 5 years, the standard deviation of the fund is 16.89% compared to the category average of 13.55%. This makes the fund more volatile than its peers over the past half-decade.
Risk Factors
Investors should note that the fund has a 5-year beta of 1.06, so it is likely going to be more volatile than the market at large. Alpha is an additional metric to take into consideration, since it represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. Over the past 5 years, the fund has a negative alpha of -4.06. This means that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
Holdings
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 mostly on equities that are traded in the United States.
The mutual fund currently has 87.7% of its holdings in stocks, with an average market capitalization of $115.05 billion. The fund has the heaviest exposure to the following market sectors:
Finance
Industrial Cyclical
Technology
Non-Durable
Turnover is 24.2%, which means, on average, the fund makes fewer trades than the average comparable fund.
Expenses
Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, PRFDX is a no load fund. It has an expense ratio of 0.65% compared to the category average of 1%. Looking at the fund from a cost perspective, PRFDX is actually cheaper than its peers.
Investors need to be aware that with this product, the minimum initial investment is $2,500; each subsequent investment needs to be at least $100.
Bottom Line
Overall, T. Rowe Price Equity Income Fund ( PRFDX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.
This could just be the start of your research on PRFDXin the Large Cap Value category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well 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.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Is T. Rowe Price Equity Income Fund (PRFDX) a Strong Mutual Fund Pick Right Now?
Having trouble finding a Large Cap Value fund? T. Rowe Price Equity Income Fund (PRFDX - Free Report) is a potential starting point. PRFDX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
PRFDX 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
PRFDX finds itself in the T. Rowe Price family, based out of Baltimore, MD. Since T. Rowe Price Equity Income Fund made its debut in October of 1985, PRFDX has garnered more than $14.25 billion in assets. The fund's current manager, John Linehan, has been in charge of the fund since November of 2015.
Performance
Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 12.21%, and it sits in the middle 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 10.5%, which places it in the middle 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, PRFDX's standard deviation comes in at 20.92%, compared to the category average of 16.19%. Over the past 5 years, the standard deviation of the fund is 16.89% compared to the category average of 13.55%. This makes the fund more volatile than its peers over the past half-decade.
Risk Factors
Investors should note that the fund has a 5-year beta of 1.06, so it is likely going to be more volatile than the market at large. Alpha is an additional metric to take into consideration, since it represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. Over the past 5 years, the fund has a negative alpha of -4.06. This means that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
Holdings
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 mostly on equities that are traded in the United States.
The mutual fund currently has 87.7% of its holdings in stocks, with an average market capitalization of $115.05 billion. The fund has the heaviest exposure to the following market sectors:
- Finance
- Industrial Cyclical
- Technology
- Non-Durable
Turnover is 24.2%, which means, on average, the fund makes fewer trades than the average comparable fund.Expenses
Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, PRFDX is a no load fund. It has an expense ratio of 0.65% compared to the category average of 1%. Looking at the fund from a cost perspective, PRFDX is actually cheaper than its peers.
Investors need to be aware that with this product, the minimum initial investment is $2,500; each subsequent investment needs to be at least $100.
Bottom Line
Overall, T. Rowe Price Equity Income Fund ( PRFDX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.
This could just be the start of your research on PRFDXin the Large Cap Value category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well 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.