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Is Alger Small Cap Focus A (AOFAX) a Strong Mutual Fund Pick Right Now?

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Looking for a Small Cap Growth fund? You may want to consider Alger Small Cap Focus A (AOFAX - Free Report) as a possible option. AOFAX possesses a Zacks Mutual Fund Rank of 3 (Hold), 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 AOFAX. 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

Alger Funds is based in New York, NY, and is the manager of AOFAX. Since Alger Small Cap Focus A made its debut in March of 2008, AOFAX has garnered more than $526.10 million in assets. The fund is currently managed by Amy Y. Zhang who has been in charge of the fund since February of 2015.

Performance

Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 13.98%, and it sits 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 22.06%, 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. The standard deviation of the fund over the past 5 years is 18.22% compared to the category average of 1.26%. 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.

Nevertheless, investors should also note that the fund has a 5-year beta of 1.12, which means 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. The fund has produced a positive alpha over the past 5 years of 2.71, which shows that managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

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, AOFAX is a load fund and it has an expense ratio of 1.19%.

While the minimum initial investment for the product is $1,000, investors should also note that each subsequent investment needs to be at least $50.

Bottom Line

With a rank of 'hold' we aren't getting a good signal one way or another on AOFAX. That is why it might be a good idea to consider other items, such as the fund's expense ratio of 1.19%, and how this compares to other potential options being considered for investment. If cheaper, it might make a decent choice, but a more expensive fund might be worth avoiding. Just make sure to pay attention to its rank in case it shifts in the near future.

For additional information on the Small Cap Growth area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into AOFAX too for additional information. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.


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