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3 Value Funds to Bet on Amid Slowing Economic Growth
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On Apr 25, the Commerce Department reported that the U.S. GDP grew at a modest pace of 1.6% in the first quarter, lower than economists’ forecast of growth of 2.2%. Also, it was sharply lower than the growth of 3.4% in the fourth quarter of 2023.
Stocks tumbled following the release of the report as fears grew that the Federal Reserve could further delay its planned rate cuts. Markets have already been volatile throughout April after a solid first quarter as rising inflation has raised concerns over the economy’s health and the uncertainty over rate cuts.
Inflation has declined sharply from its peak of 9.1% in June 2022, thanks to the Federal Reserve’s aggressive interest rate hike policy. However, it remains a lot higher than the Federal Reserve’s 2% target.
The recent volatility is being triggered by the jump in inflation over the past three months. The consumer price index (CPI) rose 3.5% in March after falling below 3% in December 2024.
The recent spike could prevent the Federal Reserve from going ahead with its planned interest rate cuts. Higher interest rates have already been weighing on the broader economy and could make the situation worse.
Given this situation, investing in value funds could be a prudent strategy for mitigating risks in uncertain times. Also, value funds, which typically comprise stocks priced below fundamental metrics like earnings, book value, and debt-to-equity ratios, and often provide dividend payments, present an appealing option for investors seeking profitable investment opportunities.
3 Best Choices
We've identified three large-cap value mutual funds that have demonstrated impressive annualized returns over 3-year and 5-year periods. These funds also hold a Zacks Mutual Fund Rank of #1 (Strong Buy), require an initial investment of no more than $5,000 and have a low expense ratio.
The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Putnam Small Cap Value (PSLAX - Free Report) fund invests most of its net asset common stocks of domestic small-cap value stocks with market capitalization similar to the companies listed on the Russell 2000 Value Index at the time of purchase. PSLAX chooses to invest in companies based on valuation, financial strength and growth potential, along with their competitive position in the industry, projected future earnings, cash flows and dividends.
PSLAX’s 3-year and 5-year annualized returns are 7.2% and 11.5%, respectively. Putnam Small Cap Value fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.60%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Fidelity Value (FDVLX - Free Report) fund invests in common stocks of medium-sized companies that possess fixed assets or are undervalued with respect to factors such as assets, earnings or growth potential based on the research of Fidelity Management & Research Company LLC (FMR). FDVLX advisors preferably invest in medium-sized companies of domestic or foreign issues.
FDVLX’s 3-year and 5-year annualized returns are 10.8% and 14.8%, respectively. Fidelity Value fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.87%, which is lower than the category average of 0.98%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
AB Equity Income A (AUIAX - Free Report) fund invests primarily in the equity and fixed-income securities of companies in the utilities industry. AUIAX’s investment strategy has four major thrusts: electric utilities that have favorable regulatory environments and strong management; telecommunications companies with strong strategic positions, cable television and wireless companies; and natural gas and water utility companies.
AUIAX’s 3-year and 5-year annualized returns are 11.8% each, respectively. AB Equity Income A fund has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.98%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
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3 Value Funds to Bet on Amid Slowing Economic Growth
On Apr 25, the Commerce Department reported that the U.S. GDP grew at a modest pace of 1.6% in the first quarter, lower than economists’ forecast of growth of 2.2%. Also, it was sharply lower than the growth of 3.4% in the fourth quarter of 2023.
Stocks tumbled following the release of the report as fears grew that the Federal Reserve could further delay its planned rate cuts. Markets have already been volatile throughout April after a solid first quarter as rising inflation has raised concerns over the economy’s health and the uncertainty over rate cuts.
Inflation has declined sharply from its peak of 9.1% in June 2022, thanks to the Federal Reserve’s aggressive interest rate hike policy. However, it remains a lot higher than the Federal Reserve’s 2% target.
The recent volatility is being triggered by the jump in inflation over the past three months. The consumer price index (CPI) rose 3.5% in March after falling below 3% in December 2024.
The recent spike could prevent the Federal Reserve from going ahead with its planned interest rate cuts. Higher interest rates have already been weighing on the broader economy and could make the situation worse.
Given this situation, investing in value funds could be a prudent strategy for mitigating risks in uncertain times. Also, value funds, which typically comprise stocks priced below fundamental metrics like earnings, book value, and debt-to-equity ratios, and often provide dividend payments, present an appealing option for investors seeking profitable investment opportunities.
3 Best Choices
We've identified three large-cap value mutual funds that have demonstrated impressive annualized returns over 3-year and 5-year periods. These funds also hold a Zacks Mutual Fund Rank of #1 (Strong Buy), require an initial investment of no more than $5,000 and have a low expense ratio.
The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Putnam Small Cap Value (PSLAX - Free Report) fund invests most of its net asset common stocks of domestic small-cap value stocks with market capitalization similar to the companies listed on the Russell 2000 Value Index at the time of purchase. PSLAX chooses to invest in companies based on valuation, financial strength and growth potential, along with their competitive position in the industry, projected future earnings, cash flows and dividends.
PSLAX’s 3-year and 5-year annualized returns are 7.2% and 11.5%, respectively. Putnam Small Cap Value fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.60%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Fidelity Value (FDVLX - Free Report) fund invests in common stocks of medium-sized companies that possess fixed assets or are undervalued with respect to factors such as assets, earnings or growth potential based on the research of Fidelity Management & Research Company LLC (FMR). FDVLX advisors preferably invest in medium-sized companies of domestic or foreign issues.
FDVLX’s 3-year and 5-year annualized returns are 10.8% and 14.8%, respectively. Fidelity Value fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.87%, which is lower than the category average of 0.98%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
AB Equity Income A (AUIAX - Free Report) fund invests primarily in the equity and fixed-income securities of companies in the utilities industry. AUIAX’s investment strategy has four major thrusts: electric utilities that have favorable regulatory environments and strong management; telecommunications companies with strong strategic positions, cable television and wireless companies; and natural gas and water utility companies.
AUIAX’s 3-year and 5-year annualized returns are 11.8% each, respectively. AB Equity Income A fund has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.98%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Want key mutual fund info delivered straight to your inbox?
Zacks' free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>