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Is Diamond Hill Large Cap Fund A (DHLAX) a Strong Mutual Fund Pick Right Now?

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Large Cap Blend fund seekers should consider taking a look at Diamond Hill Large Cap Fund A (DHLAX - Free Report) . DHLAX possesses a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

We note that DHLAX 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

Diamond Hill is based in Columbus, OH, and is the manager of DHLAX. The Diamond Hill Large Cap Fund A made its debut in July of 2001 and DHLAX has managed to accumulate roughly $1.35 billion in assets, as of the most recently available information. The fund's current manager is a team of investment professionals.

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 12.47%, 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 10.24%, 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. DHLAX's standard deviation over the past three years is 11.81% compared to the category average of 9.22%. Looking at the past 5 years, the fund's standard deviation is 11.29% compared to the category average of 9.08%. 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. In DHLAX's case, the fund lost 48.72% in the most recent bear market and outperformed its peer group by 1%. This might suggest that the fund is a better choice than its peers during a bear market.

Investors should note that the fund has a 5-year beta of 1.08, so it is likely going to be more volatile than the market at large. 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. DHLAX has generated a negative alpha over the past five years of -1.23, 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 largely on equities that are traded in the United States.

This fund is currently holding about 97.19% stock in stocks, which have an average market capitalization of $147.70 billion. The fund has the heaviest exposure to the following market sectors:

  1. Finance
  2. Technology
  3. Non-Durable

Turnover is 18%, which means this fund makes fewer trades than comparable funds.

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, DHLAX is a load fund. It has an expense ratio of 0.98% compared to the category average of 1.00%. DHLAX is actually cheaper than its peers when you consider factors like cost.

Investors should also note that the minimum initial investment for the product is $2,500 and that each subsequent investment has no minimum amount.

Bottom Line

Overall, Diamond Hill Large Cap Fund A has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

Your research on the Large Cap Blend segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer as well for additional information. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.




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