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Is CGM Focus Fund (CGMFX) a Strong Mutual Fund Pick Right Now?

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If you've been stuck searching for Large Cap Blend funds, you might want to consider passing on by CGM Focus Fund (CGMFX - Free Report) as a possibility. CGMFX holds a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

We note that CGMFX is a Large Cap Blend option, an area loaded with different options. More often than not, Large Cap Blend mutual funds invest in companies with a market cap of over $10 billion. Buying stakes in bigger companies offer these funds more stability, and are well-suited for investors with a " buy and hold " mindset. Additionally, blended funds mix large, more established firms into their portfolios, giving investors exposure to value and growth opportunities.

History of Fund/Manager

CGM is based in Boston, MA, and is the manager of CGMFX. Since CGM Focus Fund made its debut in September of 1997, CGMFX has garnered more than $928.09 million in assets. The fund's current manager, Ken Heebner, has been in charge of the fund since September of 1997.

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 11.62%, and it sits in the bottom 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 10.23%, 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. Compared to the category average of 10.55%, the standard deviation of CGMFX over the past three years is 17.66%. Over the past 5 years, the standard deviation of the fund is 17.15% compared to the category average of 10.33%. This makes the fund more 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. CGMFX lost 58.01% in the most recent bear market and underperformed its peer group by 8.27%. This makes the fund a possibly worse choice than its peers during a sliding market environment.

Nevertheless, with a 5-year beta of 1.39, the fund is likely to be more volatile than 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. CGMFX's 5-year performance has produced a negative alpha of -7.03, which means managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

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, CGMFX is a no load fund. It has an expense ratio of 1.17% compared to the category average of 1.01%. CGMFX is actually more expensive than its peers when you consider factors like cost.

Investors need to be aware that with this product, the minimum initial investment is $2,500; each subsequent investment needs to be at least $50.

Bottom Line

Overall, CGM Focus Fund has a low Zacks Mutual Fund rank, and in conjunction with its comparatively weak performance, worse downside risk, and higher fees, CGM Focus Fund looks like a somewhat weak choice for investors right now.

Don't stop here for your research on Large Cap Blend funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare CGMFX to its peers 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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