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Is T. Rowe Price New Horizons (PRNHX) a Strong Mutual Fund Pick Right Now?

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Any investors hoping to find a Small Cap Growth fund could think about starting with T. Rowe Price New Horizons (PRNHX - Free Report) . PRNHX possesses a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

PRNHX is one of many different Small Cap Growth funds to choose from. Small Cap Growth mutual funds build portfolios around stocks with markets caps under $2 billion and large growth opportunities. Additionally, these portfolios typically highlight smaller companies in promising markets and industries.

History of Fund/Manager

T. Rowe Price is responsible for PRNHX, and the company is based out of Baltimore, MD. T. Rowe Price New Horizons debuted in June of 1960. Since then, PRNHX has accumulated assets of about $16.98 billion, according to the most recently available information. The fund is currently managed by Henry M. Ellenbogen who has been in charge of the fund since March of 2010.

Performance

Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 18.35%, and it sits in the top third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 16.59%, 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. PRNHX's standard deviation over the past three years is 12.29% compared to the category average of 11.29%. The standard deviation of the fund over the past 5 years is 12.42% compared to the category average of 11.05%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should always remember the downsides to a potential investment, and this segment carries some risks one should be aware of. PRNHX lost 49.91% in the most recent bear market and outperformed its peer group by 3.16%. This makes the fund a possibly better choice than its peers during a sliding market environment.

Nevertheless, with a 5-year beta of 1.04, the fund is likely to be more volatile than the market average. Alpha is an additional metric to take into consideration, since it represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. Over the past 5 years, the fund has a positive alpha of 1.9. This means 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 largely on equities that are traded in the United States.

This fund is currently holding about 78.73% stock in stocks, which have an average market capitalization of $7.99 billion. The fund has the heaviest exposure to the following market sectors:

  1. Other
  2. Technology
  3. Retail Trade
  4. Industrial Cyclical
  5. Services

With turnover at about 38.2%, this fund is making fewer trades than comparable funds.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, PRNHX is a no load fund. It has an expense ratio of 0.77% compared to the category average of 1.30%. PRNHX is actually cheaper than its peers when you consider factors like cost.

While the minimum initial investment for the product is $2,500, investors should also note that each subsequent investment needs to be at least $100.

Bottom Line

Overall, T. Rowe Price New Horizons has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, T. Rowe Price New Horizons looks like a good potential choice for investors right now.

Want even more information about PRNHX? 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. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.


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