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Is T. Rowe Price Equity Income Fund (PRFDX) a Strong Mutual Fund Pick Right Now?
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Large Cap Value fund seekers should consider taking a look at T. Rowe Price Equity Income Fund (PRFDX - Free Report) . PRFDX bears a Zacks Mutual Fund Rank of 2 (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
T. Rowe Price is responsible for PRFDX, and the company is based out of Baltimore, MD. The T. Rowe Price Equity Income Fund made its debut in October of 1985 and PRFDX has managed to accumulate roughly $14.46 billion in assets, as of the most recently available information. The fund is currently managed by John Linehan who has been in charge of the fund since November of 2015.
Performance
Obviously, what investors are looking for in these funds is strong performance relative to their peers. PRFDX has a 5-year annualized total return of 11.2% and is in the middle third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 9.65%, 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. Compared to the category average of 16.32%, the standard deviation of PRFDX over the past three years is 21.18%. The fund's standard deviation over the past 5 years is 17.09% compared to the category average of 13.43%. This makes the fund more volatile than its peers over the past half-decade.
Risk Factors
Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. PRFDX has a 5-year beta of 1.03, which means it is likely to be as volatile as the market average. 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. With a negative alpha of -5.14, 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 93.4% stock in stocks, with an average market capitalization of $133.20 billion. The fund has the heaviest exposure to the following market sectors:
Finance
Industrial Cyclical
Non-Durable
Turnover is about 22.2%, so those in charge of the fund make fewer trades than comparable funds.
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 0.63% compared to the category average of 1%. PRFDX is actually cheaper than its peers when you consider factors like cost.
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.
Want even more information about PRFDX? Then go over to Zacks.com and check out our mutual fund comparison tool, and all of the other great features that we have to help you with your mutual fund analysis 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.
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Is T. Rowe Price Equity Income Fund (PRFDX) a Strong Mutual Fund Pick Right Now?
Large Cap Value fund seekers should consider taking a look at T. Rowe Price Equity Income Fund (PRFDX - Free Report) . PRFDX bears a Zacks Mutual Fund Rank of 2 (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
T. Rowe Price is responsible for PRFDX, and the company is based out of Baltimore, MD. The T. Rowe Price Equity Income Fund made its debut in October of 1985 and PRFDX has managed to accumulate roughly $14.46 billion in assets, as of the most recently available information. The fund is currently managed by John Linehan who has been in charge of the fund since November of 2015.
Performance
Obviously, what investors are looking for in these funds is strong performance relative to their peers. PRFDX has a 5-year annualized total return of 11.2% and is in the middle third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 9.65%, 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. Compared to the category average of 16.32%, the standard deviation of PRFDX over the past three years is 21.18%. The fund's standard deviation over the past 5 years is 17.09% compared to the category average of 13.43%. This makes the fund more volatile than its peers over the past half-decade.
Risk Factors
Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. PRFDX has a 5-year beta of 1.03, which means it is likely to be as volatile as the market average. 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. With a negative alpha of -5.14, 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 93.4% stock in stocks, with an average market capitalization of $133.20 billion. The fund has the heaviest exposure to the following market sectors:
- Finance
- Industrial Cyclical
- Non-Durable
Turnover is about 22.2%, so those in charge of the fund make fewer trades than comparable funds.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 0.63% compared to the category average of 1%. PRFDX is actually cheaper than its peers when you consider factors like cost.
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.
Want even more information about PRFDX? Then go over to Zacks.com and check out our mutual fund comparison tool, and all of the other great features that we have to help you with your mutual fund analysis 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.