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Is Virtus KAR Capital Growth A (PSTAX) a Strong Mutual Fund Pick Right Now?

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If you have been looking for Large Cap Growth funds, a place to start could be Virtus KAR Capital Growth A (PSTAX - Free Report) . PSTAX carries a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

PSTAX 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

PSTAX is a part of the Virtus Funds family of funds, a company based out of Hartford, CT. Virtus KAR Capital Growth A debuted in October of 1995. Since then, PSTAX has accumulated assets of about $446.72 million, according to the most recently available information. Douglas Foreman is the fund's current manager and has held that role since November of 2011.

Performance

Of course, investors look for strong performance in funds. This fund has delivered a 5-year annualized total return of 15.55%, 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 13.49%, 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. The standard deviation of PSTAX over the past three years is 13.19% compared to the category average of 9.77%. The standard deviation of the fund over the past 5 years is 12.26% compared to the category average of 9.55%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

It's always important to be aware of the downsides to any future investment, so one should not discount the risks that come with this segment. In the most recent bear market, PSTAX lost 53.03% and underperformed its peer group by 4.01%. This means that the fund could possibly be a worse choice than its peers during a down market environment.

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. PSTAX has a 5-year beta of 1.11, which means it 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. With a positive alpha of 1.19, 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 largely on equities that are traded in the United States.

Currently, this mutual fund is holding 98% stock in stocks, which have an average market capitalization of $155.88 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Finance
  3. Non-Durable
  4. Retail Trade

This fund's turnover is about 13%, so the fund managers are 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, PSTAX is a load fund. It has an expense ratio of 1.30% compared to the category average of 1.11%. So, PSTAX is actually more expensive 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, Virtus KAR Capital Growth A has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and higher fees, Virtus KAR Capital Growth A looks like a good potential choice for investors right now.

Don't stop here for your research on Large Cap Growth 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 PSTAX to its peers as well for additional information. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.




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