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Is Dodge & Cox Stock Fund (DODGX) a Strong Mutual Fund Pick Right Now?

Zacks Equity Research
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Having trouble finding a Large Cap Value fund? Dodge & Cox Stock Fund (DODGX) is a potential starting point. DODGX possesses a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

DODGX 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

DODGX finds itself in the Dodge & Cox family, based out of Boston, MA. The Dodge & Cox Stock Fund made its debut in December of 1964 and DODGX has managed to accumulate roughly $70.49 billion in assets, as of the most recently available information. The fund is currently managed by a team of investment professionals.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of 9.55%, and it sits in the top third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 15.82%, 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. DODGX's standard deviation over the past three years is 13.12% compared to the category average of 11.36%. Looking at the past 5 years, the fund's standard deviation is 13.07% compared to the category average of 11.2%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

One cannot ignore the volatility of this segment, however, as it is always important for investors to remember the downside to any potential investment. In DODGX's case, the fund lost 57.94% in the most recent bear market and underperformed comparable funds by 7.21%. This might suggest that the fund is a worse choice than its peers during a bear market.

Investors should note that the fund has a 5-year beta of 1.08, so it is likely going to be more volatile than 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. With a negative alpha of -1.87, managers in this portfolio find it difficult to pick 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.

Currently, this mutual fund is holding 96.67% stock in stocks, and these companies have an average market capitalization of $146.29 billion. The fund has the heaviest exposure to the following market sectors:

  1. Finance
  2. Technology
  3. Industrial Cyclical
  4. Health

Turnover is 16%, which means, on average, the fund makes 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, DODGX is a no load fund. It has an expense ratio of 0.52% compared to the category average of 1%. From a cost perspective, DODGX is actually cheaper than its peers.

While the minimum initial investment for the product is $2,500, investors should also note that each subsequent investment needs to be at least $100.

Bottom Line

Overall, Dodge & Cox Stock Fund ( DODGX ) has a high Zacks Mutual Fund rank, strong performance, average downside risk, and lower fees compared to its peers.

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 DODGX to its peers as well 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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