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Is Federated Kaufmann Small Cap C (FKCSX) a Strong Mutual Fund Pick Right Now?

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Having trouble finding a Small Cap Growth fund? Federated Kaufmann Small Cap C (FKCSX - Free Report) is a potential starting point. FKCSX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

FKCSX is one of many different Small Cap Growth funds to choose from. Small Cap Growth mutual funds build portfolios around stocks with markets caps under $2 billion and large growth opportunities. Additionally, these portfolios typically highlight smaller companies in promising markets and industries.

History of Fund/Manager

FKCSX finds itself in the Federated family, based out of Pittsburgh, PA. The Federated Kaufmann Small Cap C made its debut in December of 2002 and FKCSX has managed to accumulate roughly $129.70 million 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 carries a 5-year annualized total return of 12.89%, 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 25.97%, 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. Over the past three years, FKCSX's standard deviation comes in at 14.85%, compared to the category average of 10.5%. The fund's standard deviation over the past 5 years is 17.21% compared to the category average of 10.36%. 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. FKCSX lost 56.59% in the most recent bear market and underperformed its peer group by 3.62%. This might suggest that the fund is a worse choice than its peers during a bear market.

Even still, the fund has a 5-year beta of 1.18, 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. With a positive alpha of 0.77, managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

Holdings

Investigating 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 principally on equities that are traded in the United States.

Right now, 93% of this mutual fund's holdings are stocks, and these companies have an average market capitalization of $3.69 billion. The fund has the heaviest exposure to the following market sectors:

  1. Finance
  2. Technology
  3. Health
Turnover is 39%, which means, on average, the fund makes fewer trades than its comparable peers.

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, FKCSX is a no load fund. It has an expense ratio of 1.97% compared to the category average of 1.25%. FKCSX is actually more expensive than its peers when you consider factors like cost.

Investors should also note that the minimum initial investment for the product is $1,500 and that each subsequent investment needs to be at $100.

Bottom Line

Overall, Federated Kaufmann Small Cap C ( FKCSX ) has a high Zacks Mutual Fund rank, strong performance, worse downside risk, and higher fees compared to its peers.

Your research on the Small Cap Growth 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. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.




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