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Is Principal SmCap Gr I Inst (PGRTX) a Strong Mutual Fund Pick Right Now?

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If investors are looking at the Small Cap Growth fund category, Principal SmallCap Growth I Institutional (PGRTX - Free Report) could be a potential option. PGRTX carries a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

PGRTX is one of many different Small Cap Growth funds to choose from. Small Cap Growth mutual funds build portfolios around stocks with markets caps under $2 billion and strong growth opportunities. Additionally, these portfolios typically highlight smaller companies in promising markets and industries.

History of Fund/Manager

Principal Financial Group is based in Des Moines, IA, and is the manager of PGRTX. Principal SmallCap Growth I Institutional made its debut in December of 2000, and since then, PGRTX has accumulated about $1.63 billion in assets, per the most up-to-date date available. The fund is currently managed by Randy L. Welch who has been in charge of the fund since June of 2009.

Performance

Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 14.98%, and is in the bottom 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 11.48% The fund's 3-year annualized total return of 11.48% places it in the bottom third, a metric that will likely stand out if you prefer to look at shorter time frames.

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, PGRTX's standard deviation comes in at 14.42%, compared to the category average of 9.42%. Looking at the past 5 years, the fund's standard deviation is 14.25% compared to the category average of 13.81%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should always remember the downsides to a potential investment, and this segment carries some risks one should be aware of. PGRTX lost 55.42% in the most recent bear market and underperformed its peer group by 2.36%. This might suggest that the fund is a worse choice than its peers during a bear market.

And for investors concerned about the potential drawdown in a really bad calendar year, we can look back to 2008 for that figure. In its worst calendar year in a decade, the fund lost over 45.17%.

Nevertheless, investors should also note that the fund has a 5-year beta of 1.14, which means it is hypothetically 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. With a negative alpha of -1.55, 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 primarily on equities that are traded in the United States.

As of the last filing date, the mutual fund has 100.35% of its assets in stocks, which have an average market capitalization of $3.49 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Other
  3. Industrial Cyclical
  4. Health

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, PGRTX is a no load fund. It has an expense ratio of 1.02% compared to the category average of 1.36%. So, PGRTX is actually cheaper than its peers from a cost perspective.

Investors need to be aware that with this product, the minimum initial investment is $0; each subsequent investment has no minimum amount.

Bottom Line

Overall, Principal SmallCap Growth I Institutional PGRTX has a high Zacks Mutual Fund rank, and in conjunction with its comparatively weak performance, average downside risk, and lower fees, this fund looks like a great potential choice for investors right now.

Want even more information about PGRTX? 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. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.


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