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High Yield - Bonds fund seekers should consider taking a look at Principal High Yield A (CPHYX - Free Report) . CPHYX carries a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.
Objective
CPHYX is classified in the High Yield - Bonds segment by Zacks, an area full of investment possibilities. High Yield - Bonds funds come in below investment grade, and are referred to as "junk" bonds for this reason. Compared to their investment grade peers, these funds are at a higher default risk, but typically pay out higher yields while posing similar interest rate risks.
History of Fund/Manager
Principal Financial Group is responsible for CPHYX, and the company is based out of Des Moines, IA. Principal High Yield A debuted in April of 1998. Since then, CPHYX has accumulated assets of about $396.64 million, according to the most recently available information. The fund's current manager is a team of investment professionals.
Performance
Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 5.18%, 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 9.14%, which places it in the middle third during this time-frame.
It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.
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. The standard deviation of CPHYX over the past three years is 4.71% compared to the category average of 10.06%. The fund's standard deviation over the past 5 years is 6.35% compared to the category average of 11.46%. This makes the fund less volatile than its peers over the past half-decade.
Bond Duration
Modified duration is a measure of a given bond's interest rate sensitivity, and is a metric that's a good way to judge how fixed income securities will respond in a shifting rate environment.
For investors who think interest rates will rise, this is an important factor to consider. CPHYX has a modified duration of 2.81, which suggests that the fund will decline 2.81% for every hundred-basis-point increase in interest rates.
Income
It is important to consider the fund's average coupon because income is often a big reason for purchasing a fixed income security. Average coupon is a look at the average payout by the fund in a given year. For example, this fund's average coupon of 6.78% means that a $10,000 investment should result in a yearly payout of $678.
While a higher coupon is good for when you want a strong level of current income, it could present a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond. Income is only one part of the bond picture, investors also need to consider risk relative to broad benchmarks.
This fund has a beta of 0.32, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, CPHYX has a positive alpha of 4.6, which measures performance on a risk-adjusted basis.
Expenses
For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, CPHYX is a load fund. It has an expense ratio of 0.90% compared to the category average of 0.93%. Looking at the fund from a cost perspective, CPHYX is actually cheaper than its peers.
Investors need to be aware that with this product, the minimum initial investment is $1,000; each subsequent investment needs to be at least $100.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Bottom Line
Overall, Principal High Yield A ( CPHYX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, better downside risk, and lower fees, Principal High Yield A ( CPHYX ) looks like a good potential choice for investors right now.
For additional information on this product, or to compare it to other mutual funds in the High Yield - Bonds, make sure to go to www.zacks.com/funds/mutual-funds 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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Is CPHYX a Strong Bond Fund Right Now?
High Yield - Bonds fund seekers should consider taking a look at Principal High Yield A (CPHYX - Free Report) . CPHYX carries a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.
Objective
CPHYX is classified in the High Yield - Bonds segment by Zacks, an area full of investment possibilities. High Yield - Bonds funds come in below investment grade, and are referred to as "junk" bonds for this reason. Compared to their investment grade peers, these funds are at a higher default risk, but typically pay out higher yields while posing similar interest rate risks.
History of Fund/Manager
Principal Financial Group is responsible for CPHYX, and the company is based out of Des Moines, IA. Principal High Yield A debuted in April of 1998. Since then, CPHYX has accumulated assets of about $396.64 million, according to the most recently available information. The fund's current manager is a team of investment professionals.
Performance
Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 5.18%, 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 9.14%, which places it in the middle third during this time-frame.
It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.
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. The standard deviation of CPHYX over the past three years is 4.71% compared to the category average of 10.06%. The fund's standard deviation over the past 5 years is 6.35% compared to the category average of 11.46%. This makes the fund less volatile than its peers over the past half-decade.
Bond Duration
Modified duration is a measure of a given bond's interest rate sensitivity, and is a metric that's a good way to judge how fixed income securities will respond in a shifting rate environment.
For investors who think interest rates will rise, this is an important factor to consider. CPHYX has a modified duration of 2.81, which suggests that the fund will decline 2.81% for every hundred-basis-point increase in interest rates.
Income
It is important to consider the fund's average coupon because income is often a big reason for purchasing a fixed income security. Average coupon is a look at the average payout by the fund in a given year. For example, this fund's average coupon of 6.78% means that a $10,000 investment should result in a yearly payout of $678.
While a higher coupon is good for when you want a strong level of current income, it could present a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond. Income is only one part of the bond picture, investors also need to consider risk relative to broad benchmarks.
This fund has a beta of 0.32, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, CPHYX has a positive alpha of 4.6, which measures performance on a risk-adjusted basis.Expenses
For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, CPHYX is a load fund. It has an expense ratio of 0.90% compared to the category average of 0.93%. Looking at the fund from a cost perspective, CPHYX is actually cheaper than its peers.
Investors need to be aware that with this product, the minimum initial investment is $1,000; each subsequent investment needs to be at least $100.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Bottom Line
Overall, Principal High Yield A ( CPHYX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, better downside risk, and lower fees, Principal High Yield A ( CPHYX ) looks like a good potential choice for investors right now.
For additional information on this product, or to compare it to other mutual funds in the High Yield - Bonds, make sure to go to www.zacks.com/funds/mutual-funds 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.