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Is American Funds Growth Fund of America A (AGTHX) a Strong Mutual Fund Pick Right Now?

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Looking for a Large Cap Growth fund? You may want to consider American Funds Growth Fund of America A (AGTHX - Free Report) as a possible option. AGTHX possesses a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.

Objective

AGTHX is classified in the Large Cap Growth segment by Zacks, an area full of possibilities. Companies are usually considered to be large-cap if their stock market valuation is more than $10 billion. Large Cap Growth mutual funds invest in many large U.S. firms that are projected to grow at a faster rate than their large-cap peers.

History of Fund/Manager

AGTHX finds itself in the American Funds family, based out of Los Angeles, CA. Since American Funds Growth Fund of America A made its debut in December of 1973, AGTHX has garnered more than $93.65 billion in assets. The fund's current manager is a team of investment professionals.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund in particular has delivered a 5-year annualized total return of 11.31%, and is 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 16.25%, 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. AGTHX's standard deviation over the past three years is 12.24% compared to the category average of 9.34%. Looking at the past 5 years, the fund's standard deviation is 12.3% compared to the category average of 9.25%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

It's always important to be aware of the downsides to any future investment, so one should not discount the risks that come with this segment. AGTHX lost 48.8% in the most recent bear market and outperformed its peer group by 0.04%. This might suggest that the fund is a better choice than its peers during a bear market.

Nevertheless, with a 5-year beta of 1.03, the fund 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. The fund has produced a positive alpha over the past 5 years of 0.12, which shows that managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

Holdings

Examining 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 89.13% of its holdings in stocks, which have an average market capitalization of $233.17 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Other
  3. Finance
This fund's turnover is about 28%, so the fund managers are making fewer trades than its comparable peers.

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, AGTHX is a load fund. It has an expense ratio of 0.62% compared to the category average of 1.05%. Looking at the fund from a cost perspective, AGTHX is actually cheaper than its peers.

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 Growth Fund of America A ( AGTHX ) has a neutral Zacks Mutual Fund rank, similar performance, average downside risk, and lower fees compared to its peers.

For additional information on this product, or to compare it to other mutual funds in the Large Cap Growth, make sure to go to www.zacks.com/funds/mutual-funds 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.


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