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Is American Funds Fundamentl Invs A (ANCFX) a Strong Mutual Fund Pick Right Now?

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If you have been looking for Large Cap Blend funds, a place to start could be American Funds Fundamental Investors A (ANCFX - Free Report) . ANCFX has a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

ANCFX is part of the Large Cap Blend section, an area that boasts an array of many possible options. Large Cap Blend mutual funds most often invest in firms with a market capitalization of $10 billion or more. By investing in bigger companies, these funds offer more stability, and are often well-suited for investors with a "buy and hold" mindset. Blended funds mix large, established companies into their holdings, which gives investors exposure to both value and growth at the same time.

History of Fund/Manager

American Funds is responsible for ANCFX, and the company is based out of Los Angeles, CA. Since American Funds Fundamental Investors A made its debut in August of 1978, ANCFX has garnered more than $97 billion in assets. The fund is currently managed by a team of investment professionals.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund carries a 5-year annualized total return of 15.14%, and it sits in the middle 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 11.68%, 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. Compared to the category average of 8.79%, the standard deviation of ANCFX over the past three years is 10.39%. The fund's standard deviation over the past 5 years is 9.7% compared to the category average of 9.86%. This makes the fund less volatile than its peers over the past half-decade.

Risk Factors

Investors cannot discount the risks to this segment though, as it is always important to remember the downside for any potential investment. ANCFX lost 50.06% in the most recent bear market and underperformed its peer group by 0.49%. This makes the fund a possibly worse choice than its peers during a sliding market environment.

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 39.69%.

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. ANCFX has a 5-year beta of 1, which means it is likely to be as volatile as the market average. 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 positive alpha of 0.03, managers in this portfolio are skilled in picking 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 largely on equities that are traded in the United States.

The mutual fund currently has 95.07% of its holdings in stocks, and these companies have an average market capitalization of $180.82 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Finance
  3. Industrial Cyclical
  4. Non-Durable

Turnover is 34%, which means, on average, the fund makes fewer trades than the average comparable fund.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, ANCFX is a load fund. It has an expense ratio of 0.60% compared to the category average of 1.03%. So, ANCFX is actually cheaper than its peers from a cost perspective.

Investors need to be aware that with this product, the minimum initial investment is $250; each subsequent investment needs to be at least $50.

Bottom Line

Overall, American Funds Fundamental Investors A ANCFX 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.

Your research on the Large Cap Blend segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer 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.


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