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Is T. Rowe Price Diversified Mid Cap Growth (PRDMX) a Strong Mutual Fund Pick Right Now?

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There are plenty of choices in the Mid Cap Growth category, but where should you start your research? Well, one fund that might be worth investigating is T. Rowe Price Diversified Mid Cap Growth (PRDMX - Free Report) . PRDMX carries a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

PRDMX is part of the Mid Cap Growth section, a segment that boasts a wide array of possible selections. While Mid Cap Growth mutual funds choose companies with a stock market valuation between $2 billion and $10 billion, stocks in these funds are also expected to show broad considerable growth opportunities for investors compared to their peers. To be considered a growth stock, companies must consistently report impressive sales and/or earnings growth.

History of Fund/Manager

PRDMX finds itself in the T. Rowe Price family, based out of Baltimore, MD. The T. Rowe Price Diversified Mid Cap Growth made its debut in January of 2004 and PRDMX has managed to accumulate roughly $752.42 million in assets, as of the most recently available information. The fund's current manager, Donald J. Peters, has been in charge of the fund since January of 2004.

Performance

Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 13.62%, and it sits in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 9.72%, 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, PRDMX's standard deviation comes in at 11.39%, compared to the category average of 11.44%. The fund's standard deviation over the past 5 years is 11.23% compared to the category average of 11.35%. This makes the fund less 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, PRDMX lost 51.81% and underperformed comparable funds by 0.73%. This might suggest that the fund is a worse choice than its peers during a bear market.

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. PRDMX has a 5-year beta of 1.03, which means it is likely to be as volatile as the market average. Because alpha represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, one should pay attention to this metric as well. The fund has produced a positive alpha over the past 5 years of 0.06, which shows that managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

Holdings

Investigating 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.

This fund is currently holding about 79.74% stock in stocks, with an average market capitalization of $14.34 billion. The fund has the heaviest exposure to the following market sectors:

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

With turnover at about 22.2%, this fund makes fewer trades than the average comparable fund.

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, PRDMX is a no load fund. It has an expense ratio of 0.84% compared to the category average of 1.20%. Looking at the fund from a cost perspective, PRDMX is actually cheaper than its peers.

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

Bottom Line

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

This could just be the start of your research on PRDMXin the Mid Cap Growth 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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