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Is T. Rowe Price Equity Income Fund (PRFDX) a Strong Mutual Fund Pick Right Now?
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Having trouble finding a Large Cap Value fund? T. Rowe Price Equity Income Fund (PRFDX - Free Report) is a potential starting point. PRFDX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
PRFDX is classified in the Large Cap Value segment by Zacks, which is an area full of possibilities. Investors interested in a stable income stream fund these mutual funds very appealing because they have a unique investing strategy. Large Cap Value funds invest in stocks with a market capitalization of $10 billion or more, but whose share prices do not reflect their intrinsic value. This tactic often leads to low P/E ratios and high dividend yields; however, these funds'high growth opportunity are often slowed, as large-cap securities are generally in stable industries with low to moderate growth prospects.
History of Fund/Manager
T. Rowe Price is based in Baltimore, MD, and is the manager of PRFDX. Since T. Rowe Price Equity Income Fund made its debut in October of 1985, PRFDX has garnered more than $18.37 billion in assets. John D. Linehan is the fund's current manager and has held that role since November of 2015.
Performance
Investors naturally seek funds with strong performance. PRFDX has a 5-year annualized total return of 12.44% 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 12.18%, 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. Over the past three years, PRFDX's standard deviation comes in at 10.84%, compared to the category average of 9.14%. The standard deviation of the fund over the past 5 years is 9.98% compared to the category average of 8.84%. This makes the fund more 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. In the most recent bear market, PRFDX lost 52.57% and underperformed its peer group by 2.4%. This makes the fund a possibly worse choice than its peers during a sliding market environment.
Even still, the fund has a 5-year beta of 0.99, so investors should note that it is hypothetically as volatile as 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. PRFDX has generated a negative alpha over the past five years of -2.87, demonstrating that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
Holdings
Examining 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.
Currently, this mutual fund is holding 89.85% stock in stocks, which have an average market capitalization of $118.16 billion. The fund has the heaviest exposure to the following market sectors:
Finance
Industrial Cyclical
Technology
Turnover is 19.4%, which means, on average, the fund makes 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, PRFDX is a no load fund. It has an expense ratio of 0.65% compared to the category average of 0.95%. From a cost perspective, PRFDX is actually cheaper than its peers.
This fund requires a minimum initial investment of $2,500, and each subsequent investment should be at least $100.
Bottom Line
Overall, T. Rowe Price Equity Income Fund has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, T. Rowe Price Equity Income Fund looks like a great potential choice for investors right now.
This could just be the start of your research on PRFDX in the Large Cap Value category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank 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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Is T. Rowe Price Equity Income Fund (PRFDX) a Strong Mutual Fund Pick Right Now?
Having trouble finding a Large Cap Value fund? T. Rowe Price Equity Income Fund (PRFDX - Free Report) is a potential starting point. PRFDX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
PRFDX is classified in the Large Cap Value segment by Zacks, which is an area full of possibilities. Investors interested in a stable income stream fund these mutual funds very appealing because they have a unique investing strategy. Large Cap Value funds invest in stocks with a market capitalization of $10 billion or more, but whose share prices do not reflect their intrinsic value. This tactic often leads to low P/E ratios and high dividend yields; however, these funds'high growth opportunity are often slowed, as large-cap securities are generally in stable industries with low to moderate growth prospects.
History of Fund/Manager
T. Rowe Price is based in Baltimore, MD, and is the manager of PRFDX. Since T. Rowe Price Equity Income Fund made its debut in October of 1985, PRFDX has garnered more than $18.37 billion in assets. John D. Linehan is the fund's current manager and has held that role since November of 2015.
Performance
Investors naturally seek funds with strong performance. PRFDX has a 5-year annualized total return of 12.44% 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 12.18%, 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. Over the past three years, PRFDX's standard deviation comes in at 10.84%, compared to the category average of 9.14%. The standard deviation of the fund over the past 5 years is 9.98% compared to the category average of 8.84%. This makes the fund more 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. In the most recent bear market, PRFDX lost 52.57% and underperformed its peer group by 2.4%. This makes the fund a possibly worse choice than its peers during a sliding market environment.
Even still, the fund has a 5-year beta of 0.99, so investors should note that it is hypothetically as volatile as 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. PRFDX has generated a negative alpha over the past five years of -2.87, demonstrating that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
Holdings
Examining 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.
Currently, this mutual fund is holding 89.85% stock in stocks, which have an average market capitalization of $118.16 billion. The fund has the heaviest exposure to the following market sectors:
Turnover is 19.4%, which means, on average, the fund makes 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, PRFDX is a no load fund. It has an expense ratio of 0.65% compared to the category average of 0.95%. From a cost perspective, PRFDX is actually cheaper than its peers.
This fund requires a minimum initial investment of $2,500, and each subsequent investment should be at least $100.
Bottom Line
Overall, T. Rowe Price Equity Income Fund has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, T. Rowe Price Equity Income Fund looks like a great potential choice for investors right now.
This could just be the start of your research on PRFDX in the Large Cap Value category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank 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.