Back to top

Is Vanguard Windsor-II Investor (VWNFX) a Strong Mutual Fund Pick Right Now?

Read MoreHide Full Article

If you've been stuck searching for Large Cap Value funds, consider Vanguard Windsor-II Investor (VWNFX - Free Report) as a possibility. VWNFX carries a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

VWNFX is one of many Large Cap Value mutual funds to choose from. These funds invest in equities with a market capitalization of $10 billion or more, but whose share prices do not reflect their intrinsic value. This strategy can often produce low P/E ratios and high dividend yields; growth levels; however, growth levels are oftentimes cut back. These funds'high growth opportunities are slowed even more since large-cap stocks are usually in more stable industries with low to moderate growth prospects. Thus, investors interested in a stable income stream fund Large Cap Value funds very appealing.

History of Fund/Manager

VWNFX finds itself in the Vanguard Group family, based out of Malvern, PA. The Vanguard Windsor-II Investor made its debut in June of 1985 and VWNFX has managed to accumulate roughly $11.39 billion in assets, as of the most recently available information. The fund's current manager is a team of investment professionals.

Performance

Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 4.85%, and is in the bottom third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 8.07%, 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. Over the past three years, VWNFX's standard deviation comes in at 12.17%, compared to the category average of 9.93%. Over the past 5 years, the standard deviation of the fund is 12.55% compared to the category average of 10.29%. 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. In the most recent bear market, VWNFX lost 52.87% and underperformed comparable funds by 2.23%. This makes the fund a possibly worse choice than its peers during a sliding market environment.

Even still, the fund has a 5-year beta of 1.02, so investors should note that it is hypothetically as volatile as 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. VWNFX's 5-year performance has produced a negative alpha of -4.48, which means managers in this portfolio find it difficult to pick 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 primarily on equities that are traded in the United States.

The mutual fund currently has 90.78% of its holdings in stocks, with an average market capitalization of $169.54 billion. The fund has the heaviest exposure to the following market sectors:

  1. Finance
  2. Technology
  3. Energy
Turnover is 29%, which means this fund makes fewer trades than comparable funds.

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, VWNFX is a no load fund. It has an expense ratio of 0.33% compared to the category average of 0.99%. Looking at the fund from a cost perspective, VWNFX is actually cheaper than its peers.

While the minimum initial investment for the product is $3,000, investors should also note that each subsequent investment needs to be at least $1.

Bottom Line

Overall, Vanguard Windsor-II Investor ( VWNFX ) has a high Zacks Mutual Fund rank, weak performance, average downside risk, and lower fees compared to its peers.

This could just be the start of your research on VWNFXin the Large Cap Value 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 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.


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


Vanguard Windsor-II Inv (VWNFX) - free report >>

Published in