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Is American Funds Fundamentl Invs A (ANCFX) a Strong Mutual Fund Pick Right Now?

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If investors are looking at the Large Cap Blend fund category, American Funds Fundamental Investors A (ANCFX - Free Report) could be a potential option. ANCFX bears a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

ANCFX is part of the Large Cap Blend section, an area that boasts an array of many possible options. Large Cap Blend mutual funds most often invest in firms with a market capitalization of $10 billion or more. By investing in bigger companies, these funds offer more stability, and are often well-suited for investors with a “buy and hold" mindset. Blended funds mix large, established companies into their holdings, which gives investors exposure to both value and growth at the same time.

History of Fund/Manager

ANCFX is a part of the American Funds family of funds, a company based out of Los Angeles, CA. American Funds Fundamental Investors A made its debut in July of 1978, and since then, ANCFX has accumulated about $50.20 billion in assets, per the most up-to-date date available. 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 15.14%, and is in the middle third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 11.68%, 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. ANCFX's standard deviation over the past three years is 10.39% compared to the category average of 8.79%. Looking at the past 5 years, the fund's standard deviation is 9.7% compared to the category average of 9.86%. This makes the fund less 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. ANCFX lost 50.06% in the most recent bear market and underperformed its peer group by 0.49%. This makes the fund a possibly worse choice than its peers during a sliding market environment.

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. ANCFX has a 5-year beta of 1, 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. ANCFX's 5-year performance has produced a positive alpha of 0.03, which means 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 principally on equities that are traded in the United States.

As of the last filing date, the mutual fund has 94.23% of its assets in stocks, with an average market capitalization of $180.82 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Finance
  3. Industrial Cyclical
  4. Non-Durable

This fund's turnover is about 34%, so the fund managers are making fewer trades than its comparable peers.

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, ANCFX is a load fund. It has an expense ratio of 0.60% compared to the category average of 1.03%. From a cost perspective, ANCFX is actually cheaper than its peers.

While the minimum initial investment for the product is $250, investors should also note that each subsequent investment needs to be at least $50.

Bottom Line

Overall, American Funds Fundamental Investors A ANCFX has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

Want even more information about ANCFX? Then go over to Zacks.com and check out our mutual fund comparison tool, and all of the other great features that we have to help you with your mutual fund analysis 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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