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Is T. Rowe Price QM US Small Cap Growth Equity (PRDSX) a Strong Mutual Fund Pick Right Now?

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If you've been stuck searching for Small Cap Growth funds, consider T. Rowe Price QM US Small Cap Growth Equity (PRDSX - Free Report) as a possibility. PRDSX holds a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

The world of Small Cap Growth funds is an area filled with options, such as PRDSX. These funds tend to create their portfolios around stocks that sport large growth opportunities and market capitalization of less than $2 billion. The companies in these portfolios are usually on the smaller side, and are in up-and-coming industries and markets.

History of Fund/Manager

T. Rowe Price is based in Baltimore, MD, and is the manager of PRDSX. T. Rowe Price QM US Small Cap Growth Equity made its debut in January of 1998, and since then, PRDSX has accumulated about $4.64 billion in assets, per the most up-to-date date available. Sudhir Nanda is the fund's current manager and has held that role since October of 2006.

Performance

Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 6.63%, and is 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 8.18%, which places it in the middle 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. PRDSX's standard deviation over the past three years is 14.44% compared to the category average of 12.59%. The standard deviation of the fund over the past 5 years is 13.94% compared to the category average of 12.34%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should always remember the downsides to a potential investment, and this segment carries some risks one should be aware of. PRDSX lost 48.68% in the most recent bear market and outperformed its peer group by 4.29%. This means that the fund could possibly be a better choice than its peers during a down market environment.

Even still, the fund has a 5-year beta of 1.12, so investors should note that 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. PRDSX has generated a negative alpha over the past five years of -2.28, demonstrating that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Holdings

Exploring 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.

Right now, 97.95% of this mutual fund's holdings are stocks, which have an average market capitalization of $5.91 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Other
  3. Industrial Cyclical
  4. Health
  5. Services
Turnover is about 18.8%, so those in charge of the fund make fewer trades than the average comparable fund.

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, PRDSX is a no load fund. It has an expense ratio of 0.80% compared to the category average of 1.25%. Looking at the fund from a cost perspective, PRDSX is actually cheaper than its peers.

This fund requires a minimum initial investment of $2,500, and each subsequent investment should be at least $100.

Bottom Line

Overall, T. Rowe Price QM US Small Cap Growth Equity ( PRDSX ) has a high Zacks Mutual Fund rank, strong performance, average downside risk, and lower fees compared to its peers.

This could just be the start of your research on PRDSXin 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. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.




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