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Is Vanguard Windsor-II Admiral (VWNAX) a Strong Mutual Fund Pick Right Now?

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Having trouble finding a Large Cap Value fund? Vanguard Windsor-II Admiral (VWNAX - Free Report) is a potential starting point. VWNAX has a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

VWNAX 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

Vanguard Group is based in Malvern, PA, and is the manager of VWNAX. The Vanguard Windsor-II Admiral made its debut in May of 2001 and VWNAX has managed to accumulate roughly $34.21 billion in assets, as of the most recently available information. A team of investment professionals is the fund's current manager.

Performance

Investors naturally seek funds with strong performance. VWNAX has a 5-year annualized total return of 7.14% and is in the bottom 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 11%, 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. The standard deviation of VWNAX over the past three years is 12.68% compared to the category average of 10.57%. The fund's standard deviation over the past 5 years is 12.43% compared to the category average of 10.65%. 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. VWNAX lost 52.81% in the most recent bear market and underperformed its peer group by 2%. This makes the fund a possibly worse choice than its peers during a sliding market environment.

Nevertheless, investors should also note that the fund has a 5-year beta of 1.01, which means it is hypothetically as volatile as the market at large. Another factor to consider is alpha, as it reflects a portfolio's performance on a risk-adjusted basis relative to a benchmark-in this case, the S&P 500. VWNAX's 5-year performance has produced a negative alpha of -3.24, which means managers in this portfolio find it difficult to pick 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, 93.54% of this mutual fund's holdings are stocks, which have 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
This fund's turnover is about 56%, so the fund managers are making 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, VWNAX is a no load fund. It has an expense ratio of 0.25% compared to the category average of 0.99%. So, VWNAX is actually cheaper than its peers from a cost perspective.

Investors need to be aware that with this product, the minimum initial investment is $50,000; each subsequent investment needs to be at least $1.

Bottom Line

Overall, Vanguard Windsor-II Admiral ( VWNAX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively weak performance, average downside risk, and lower fees, Vanguard Windsor-II Admiral ( VWNAX ) looks like a great potential choice for investors right now.

Don't stop here for your research on Large Cap Value funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare VWNAX to its peers 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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