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Is American Funds Cap Income Builder A (CAIBX) a Strong Mutual Fund Pick Right Now?

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Having trouble finding a Large Cap Blend fund? Well, American Funds Cap Income Builder A (CAIBX - Free Report) would not be a good potential starting point right now. CAIBX possesses a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

CAIBX is classified in the Large Cap Blend segment by Zacks, which is an area full of potential. Targeting companies with market caps of more than $10 billion, Large Cap Blend mutual funds offer a stable investment choice; these funds are perfect for investors with a " buy and hold " mindset. Since blended funds mix large, more established firms into their portfolios, investors are exposed to both value and growth opportunities.

History of Fund/Manager

CAIBX finds itself in the American Funds family, based out of Los Angeles, CA. American Funds Cap Income Builder A debuted in July of 1987. Since then, CAIBX has accumulated assets of about $70.30 billion, according to the most recently available information. The fund's current manager, a team of investment professionals.

Performance

Of course, investors look for strong performance in funds. CAIBX has a 5-year annualized total return of 7.6% and is in the bottom 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 5.82%, which places it in the bottom 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. The standard deviation of CAIBX over the past three years is 7.39% compared to the category average of 8.72%. The fund's standard deviation over the past 5 years is 7.65% compared to the category average of 9.9%. This makes the fund less volatile than its peers over the past half-decade.

Risk Factors

One cannot ignore the volatility of this segment, however, as it is always important for investors to remember the downside to any potential investment. In CAIBX's case, the fund lost 40.71% in the most recent bear market and outperformed its peer group by 8.96%. This makes the fund a possibly better choice than its peers during a sliding market environment.

Nevertheless, investors should also note that the fund has a 5-year beta of 0.65, which means it is hypothetically less volatile than the market at large. 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. CAIBX's 5-year performance has produced a negative alpha of -2.37, which means managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

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, CAIBX is a load fund. It has an expense ratio of 0.59% compared to the category average of 1%. CAIBX is actually cheaper than its peers when you consider factors like cost.

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 Cap Income Builder A CAIBX has a low Zacks Mutual Fund rank, and in conjunction with its comparatively weak performance, average downside risk, and lower fees, American Funds Cap Income Builder A looks like a somewhat weak choice for investors right now.

Want even more information about CAIBX? 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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