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Is T. Rowe Price Growth Stock Fund (PRGFX) a Strong Mutual Fund Pick Right Now?

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If you're looking for a Large Cap Growth fund category, then a potential option is T. Rowe Price Growth Stock Fund (PRGFX - Free Report) . PRGFX bears a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.

Objective

PRGFX is part of the Large Cap Growth section, and this segment boasts an array of other possible options. Large Cap Growth mutual funds purchase stakes in numerous large U.S. companies that are expected to develop and grow at a faster rate than other large-cap stocks. Companies are usually considered to be large-cap if their market capitalization is over $10 billion.

History of Fund/Manager

T. Rowe Price is based in Baltimore, MD, and is the manager of PRGFX. The T. Rowe Price Growth Stock Fund made its debut in April of 1950 and PRGFX has managed to accumulate roughly $38.93 billion in assets, as of the most recently available information. The fund is currently managed by Joseph B. Fath who has been in charge of the fund since January of 2014.

Performance

Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 17.01%, and is in the top 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 13.73%, 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 9.51%, the standard deviation of PRGFX over the past three years is 12.87%. The standard deviation of the fund over the past 5 years is 12.17% compared to the category average of 9.32%. 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, PRGFX lost 49.13% and underperformed its peer group by 0.11%. This might suggest that the fund is a worse choice than its peers during a bear market.

Even still, the fund has a 5-year beta of 1.06, so investors should note that it is hypothetically more 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. The fund has produced a positive alpha over the past 5 years of 2.84, which shows that managers in this portfolio are skilled in picking 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 mostly on equities that are traded in the United States.

Right now, 78.93% of this mutual fund's holdings are stocks, with an average market capitalization of $252.54 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Finance

Turnover is 50.8%, which means this fund makes fewer trades than the average comparable fund.

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, PRGFX is a no load fund. It has an expense ratio of 0.67% compared to the category average of 1.12%. So, PRGFX is actually cheaper than its peers from a cost perspective.

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 Growth Stock Fund has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, T. Rowe Price Growth Stock Fund looks like a somewhat average choice for investors right now.

For additional information on the Large Cap Growth area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into PRGFX too for additional information. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.




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