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Is Franklin Growth Opportunities A (FGRAX) a Strong Mutual Fund Pick Right Now?

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If you've been stuck searching for Mid Cap Growth funds, consider Franklin Growth Opportunities A (FGRAX - Free Report) as a possibility. FGRAX holds 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 FGRAX is a Mid Cap Growth fund, and this area is also loaded with many different options. Companies are usually considered growth stocks when they consistently report notable sales and/or earnings growth. Thus, Mid Cap Growth funds pick stocks--usually companies with a market cap between $2 billion and $10 billion--that demonstrate extensive growth opportunities for investors compared to their peers.

History of Fund/Manager

Franklin Templeton is based in San Mateo, CA, and is the manager of FGRAX. Franklin Growth Opportunities A debuted in June of 1999. Since then, FGRAX has accumulated assets of about $2.60 billion, according to the most recently available information. The fund's current manager, Grant Bowers, has been in charge of the fund since March of 2007.

Performance

Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 14.62%, and is 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 11.16%, 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. FGRAX's standard deviation over the past three years is 12.43% compared to the category average of 9.32%. Looking at the past 5 years, the fund's standard deviation is 12.13% compared to the category average of 9.17%. 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 FGRAX's case, the fund lost 50.13% in the most recent bear market and outperformed its peer group by 1.05%. This might suggest that the fund is a better choice than its peers during a bear market.

Nevertheless, with a 5-year beta of 1.02, the fund 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 1.01, 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 largely on equities that are traded in the United States.

This fund is currently holding about 97.77% stock in stocks, which have an average market capitalization of $268.54 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Finance

Turnover is 47.75%, which means, on average, the fund makes fewer trades than its comparable peers.

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, FGRAX is a load fund. It has an expense ratio of 1.01% compared to the category average of 1.20%. Looking at the fund from a cost perspective, FGRAX is actually cheaper than its peers.

While the minimum initial investment for the product is $1,000, investors should also note that there is no minimum for each subsequent investment.

Bottom Line

Overall, Franklin Growth Opportunities 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.

Want even more information about FGRAX? Then go over to Zacks.com and check out our mutual fund comparison tool, and all of the other great features that we have to help you with your mutual fund analysis for additional information. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.


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