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Is American Funds Mutual Fund A (AMRMX) a Strong Mutual Fund Pick Right Now?

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If you have been looking for Large Cap Value fund category, a potential starting could be American Funds Mutual Fund A (AMRMX - Free Report) . AMRMX bears a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.

Objective

AMRMX is one of many Large Cap Value mutual funds to choose from. These funds invest in equities with a market capitalization of $10 billion or more, but whose share prices do not reflect their intrinsic value. This strategy can often produce low P/E ratios and high dividend yields; growth levels; however, growth levels are oftentimes cut back. These funds'high growth opportunities are slowed even more since large-cap stocks are usually in more stable industries with low to moderate growth prospects. Thus, investors interested in a stable income stream fund Large Cap Value funds very appealing.

History of Fund/Manager

American Funds is responsible for AMRMX, and the company is based out of Los Angeles, CA. The American Funds Mutual Fund A made its debut in February of 1950 and AMRMX has managed to accumulate roughly $25.51 billion in assets, as of the most recently available information. 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 has delivered a 5-year annualized total return of 7.89%, and is in the top 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 9.65%, 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. AMRMX's standard deviation over the past three years is 9.04% compared to the category average of 8.99%. Over the past 5 years, the standard deviation of the fund is 9.64% compared to the category average of 9.35%. 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. In AMRMX's case, the fund lost 43.28% in the most recent bear market and outperformed its peer group by 7.35%. This means that the fund could possibly be a better choice than its peers during a down market environment.

Nevertheless, investors should also note that the fund has a 5-year beta of 0.79, which means it is hypothetically less volatile than the market at large. 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. AMRMX has generated a positive alpha over the past five years of 0.04, demonstrating that 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 primarily on equities that are traded in the United States.

Right now, 91.29% of this mutual fund's holdings are stocks, which have an average market capitalization of $144.55 billion. The fund has the heaviest exposure to the following market sectors:

  1. Other
  2. Technology
  3. Finance
  4. Industrial Cyclical
Turnover is about 16%, so those in charge of the fund make fewer trades than its comparable peers.

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, AMRMX is a load fund. It has an expense ratio of 0.58% compared to the category average of 0.99%. So, AMRMX 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 Mutual Fund A ( AMRMX ) has a neutral Zacks Mutual Fund rank, strong 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 Value, make sure to go to www.zacks.com/funds/mutual-funds for additional information. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.


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