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Is T. Rowe Price Diversified Mid Cap Growth (PRDMX) a Strong Mutual Fund Pick Right Now?

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There are plenty of choices in the Mid Cap Growth category, but where should you start your research? Well, one fund that might be worth investigating is T. Rowe Price Diversified Mid Cap Growth (PRDMX - Free Report) . PRDMX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

We note that PRDMX is a Mid Cap Growth fund, and this area is also loaded with many different options. Companies are usually considered growth stocks when they consistently report notable sales and/or earnings growth. Thus, Mid Cap Growth funds pick stocks--usually companies with a market cap between $2 billion and $10 billion--that demonstrate extensive growth opportunities for investors compared to their peers.

History of Fund/Manager

T. Rowe Price is based in Baltimore, MD, and is the manager of PRDMX. The T. Rowe Price Diversified Mid Cap Growth made its debut in January of 2004 and PRDMX has managed to accumulate roughly $1.76 billion in assets, as of the most recently available information. The fund's current manager, Donald J. Peters, has been in charge of the fund since January of 2004.

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 21.14%, and it sits in the top 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 20.66%, 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. PRDMX's standard deviation over the past three years is 21.18% compared to the category average of 18.84%. Looking at the past 5 years, the fund's standard deviation is 17.28% compared to the category average of 15.47%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

With a 5-year beta of 1.09, the fund is likely to be more volatile than 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. The fund has produced a positive alpha over the past 5 years of 2.67, which shows that managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

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, PRDMX is a no load fund. It has an expense ratio of 0.80% compared to the category average of 1.18%. Looking at the fund from a cost perspective, PRDMX is actually cheaper than its peers.

While the minimum initial investment for the product is $2,500, investors should also note that each subsequent investment needs to be at least $100.

Bottom Line

Overall, T. Rowe Price Diversified Mid Cap Growth ( PRDMX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

For additional information on the Mid Cap Growth area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into PRDMX too 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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