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Is Alger Small Cap Focus A (AOFAX) a Strong Mutual Fund Pick Right Now?

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Small Cap Growth fund seekers should consider taking a look at Alger Small Cap Focus A (AOFAX - Free Report) . AOFAX carries a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

AOFAX is part of the Small Cap Growth category, and this segment boasts an array of many other possible options. Small Cap Growth mutual funds usually focus their portfolios on stocks with large growth opportunities and a market cap of under $2 billion. These portfolios tend to feature small companies in up-and-coming industries and markets.

History of Fund/Manager

Alger Funds is based in New York, NY, and is the manager of AOFAX. Alger Small Cap Focus A debuted in March of 2008. Since then, AOFAX has accumulated assets of about $103.50 million, according to the most recently available information. The fund's current manager, Amy Y. Zhang, has been in charge of the fund since February of 2015.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of 13.47%, 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 20.25%, 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 10.09%, the standard deviation of AOFAX over the past three years is 18.43%. The standard deviation of the fund over the past 5 years is 16.69% compared to the category average of 10.16%. 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.

Nevertheless, investors should also note that the fund has a 5-year beta of 1.17, which means it is hypothetically 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. The fund has produced a positive alpha over the past 5 years of 1.05, which shows that managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

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, AOFAX is a load fund. It has an expense ratio of 1.20% compared to the category average of 1.29%. From a cost perspective, AOFAX is actually cheaper than its peers.

Investors should also note that the minimum initial investment for the product is $1,000 and that each subsequent investment needs to be at $50.

Bottom Line

Overall, Alger Small Cap Focus A ( AOFAX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, worse downside risk, and lower fees, Alger Small Cap Focus A ( AOFAX ) looks like a good potential choice for investors right now.

This could just be the start of your research on AOFAXin the Small 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. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.


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