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Is Vanguard PRIMECAP Fund Inv (VPMCX) a Strong Mutual Fund Pick Right Now?

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If you've been stuck searching for Large Cap Growth funds, consider Vanguard PRIMECAP Fund Investor (VPMCX - Free Report) as a possibility. VPMCX has a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

VPMCX 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

Vanguard Group is based in Malvern, PA, and is the manager of VPMCX. Since Vanguard PRIMECAP Fund Investor made its debut in November of 1984, VPMCX has garnered more than $7.61 billion in assets. A team of investment professionals is the fund's current manager.

Performance

Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 17.09%, and it sits in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 10.06%, 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. Over the past three years, VPMCX's standard deviation comes in at 11.76%, compared to the category average of 10.07%. Looking at the past 5 years, the fund's standard deviation is 10.76% compared to the category average of 10.91%. This makes the fund less volatile than its peers over the past half-decade.

Risk Factors

Investors cannot discount the risks to this segment though, as it is always important to remember the downside for any potential investment. VPMCX lost 44.35% in the most recent bear market and outperformed its peer group by 4.53%. This could mean that the fund is a better 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. VPMCX has a 5-year beta of 1.03, which means it is likely to be as volatile as the market average. Another factor to consider is alpha, as it reflects a portfolio's performance on a risk-adjusted basis relative to a benchmark-in this case, the S&P 500. The fund has produced a positive alpha over the past 5 years of 1.33, which shows that managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

Holdings

Exploring 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.

Right now, 94.64% of this mutual fund's holdings are stocks, and these companies have an average market capitalization of $134.16 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Industrial Cyclical
  3. Health

Turnover is 12%, which means, on average, the fund makes 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, VPMCX is a no load fund. It has an expense ratio of 0.39% compared to the category average of 1.14%. From a cost perspective, VPMCX is actually cheaper than its peers.

This fund requires a minimum initial investment of $3,000, and each subsequent investment should be at least $1.

Bottom Line

Overall, Vanguard PRIMECAP Fund Investor VPMCX 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.

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. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.




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