Back to top

Is T. Rowe Price New Horizons (PRNHX) a Strong Mutual Fund Pick Right Now?

Read MoreHide Full Article

On the lookout for a Small Cap Growth fund? Starting with T. Rowe Price New Horizons (PRNHX - Free Report) is one possibility. PRNHX possesses a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

PRNHX 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

PRNHX is a part of the T. Rowe Price family of funds, a company based out of Baltimore, MD. T. Rowe Price New Horizons made its debut in June of 1960, and since then, PRNHX has accumulated about $16.57 billion in assets, per the most up-to-date date available. Joshua K. Spencer is the fund's current manager and has held that role since March of 2019.

Performance

Investors naturally seek funds with strong performance. PRNHX has a 5-year annualized total return of 15.65% 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 24.02%, 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, PRNHX's standard deviation comes in at 14.32%, compared to the category average of 12.97%. Over the past 5 years, the standard deviation of the fund is 14.33% compared to the category average of 13.07%. 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. In PRNHX's case, the fund lost 49.92% in the most recent bear market and outperformed its peer group by 3%. This could mean that the fund is a better choice than comparable funds during a bear market.

Nevertheless, investors should also note that the fund has a 5-year beta of 1.04, which means it is hypothetically more volatile than the market at large. Because alpha represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, one should pay attention to this metric as well. With a positive alpha of 4.44, managers in this portfolio are skilled in picking 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.

The mutual fund currently has 90.3% of its holdings in stocks, which have an average market capitalization of $10.07 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Other
  3. Industrial Cyclical
  4. Services
  5. Health
Turnover is 39.3%, which means, on average, the fund makes fewer trades than comparable funds.

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, PRNHX is a no load fund. It has an expense ratio of 0.77% compared to the category average of 1.22%. Looking at the fund from a cost perspective, PRNHX 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 New Horizons ( PRNHX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

For additional information on this product, or to compare it to other mutual funds in the Small Cap Growth, make sure to go to www.zacks.com/funds/mutual-funds 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.


In-Depth Zacks Research for the Tickers Above


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


T. Rowe Price New Horizons (PRNHX) - free report >>

Published in