Is AB Discovery Growth A (CHCLX) a Strong Mutual Fund Pick Right Now?
If you have been looking for Mid Cap Growth funds, a place to start could be AB Discovery Growth A (CHCLX). CHCLX carries a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.
Objective
CHCLX is part of the Mid Cap Growth section, a segment that boasts a wide array of possible selections. While Mid Cap Growth mutual funds choose companies with a stock market valuation between $2 billion and $10 billion, stocks in these funds are also expected to show broad considerable growth opportunities for investors compared to their peers. To be considered a growth stock, companies must consistently report impressive sales and/or earnings growth.
History of Fund/Manager
CHCLX is a part of the AllianceBernstein family of funds, a company based out of New York, NY. Since AB Discovery Growth A made its debut in July of 1938, CHCLX has garnered more than $625.97 million in assets. A team of investment professionals is the fund's current manager.
Performance
Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 8.62%, and it sits 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 -4.01%, which places it in the bottom third during this time-frame.
It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.
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. CHCLX's standard deviation over the past three years is 23.85% compared to the category average of 15.34%. Looking at the past 5 years, the fund's standard deviation is 24% compared to the category average of 16.23%. This makes the fund more volatile than its peers over the past half-decade.
Risk Factors
Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. CHCLX has a 5-year beta of 1.12, which means it is likely to be more volatile than the market average. 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. CHCLX's 5-year performance has produced a negative alpha of -5.83, 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 principally on equities that are traded in the United States.
The mutual fund currently has 89.52% of its holdings in stocks, which have an average market capitalization of $9.08 billion. The fund has the heaviest exposure to the following market sectors:
Technology
Industrial Cyclical
Health
Turnover is 70%, which means this fund makes more trades in a given year than the category average.
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, CHCLX is a load fund. It has an expense ratio of 0.93% compared to the category average of 0.98%. From a cost perspective, CHCLX is actually cheaper than its peers.
This fund requires a minimum initial investment of $2,500, and each subsequent investment should be at least $50.
Fees charged by investment advisors have not been taken into considiration. Returns would be less if those were included.
Bottom Line
Overall, even with its comparatively weak performance, worse downside risk, and lower fees, AB Discovery Growth A ( CHCLX ) has a high Zacks Mutual Fund rank, and therefore looks a great potential choice for investors right now.
For additional information on this product, or to compare it to other mutual funds in the Mid Cap Growth, make sure to go to www.zacks.com/funds/mutual-funds 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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