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

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If you've been stuck searching for Large Cap Growth funds, you might want to consider passing on by American Funds Growth Fund of America A (AGTHX - Free Report) as a possibility. AGTHX bears a Zacks Mutual Fund Rank of 4 (Sell), 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

American Funds is based in Los Angeles, CA, and is the manager of AGTHX. The American Funds Growth Fund of America A made its debut in December of 1973 and AGTHX has managed to accumulate roughly $86.38 billion in assets, as of the most recently available information. 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 in particular has delivered a 5-year annualized total return of 11.69%, and is in the middle 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 14.52%, 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 9.49%, the standard deviation of AGTHX over the past three years is 12.88%. Looking at the past 5 years, the fund's standard deviation is 12.68% compared to the category average of 9.66%. 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 AGTHX's case, the fund lost 48.8% in the most recent bear market and outperformed its peer group by 0%. This could mean that the fund is an on par choice than comparable funds during a bear market.

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. AGTHX has a 5-year beta of 1.01, 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. Over the past 5 years, the fund has a positive alpha of 0.3. This means 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 mostly on equities that are traded in the United States.

The mutual fund currently has 93.15% of its holdings in stocks, with an average market capitalization of $221.85 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Finance
  3. Other
Turnover is about 42%, so those in charge of the fund make fewer trades than the average comparable fund.

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, AGTHX is a load fund. It has an expense ratio of 0.64% 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 low Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, American Funds Growth Fund of America A ( AGTHX ) looks like a somewhat weak choice for investors right now.

Your research on the Large Cap Growth 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. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.


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