U.S. Markets open in 2 hrs 1 min

Is Franklin DynaTech A (FKDNX) a Strong Mutual Fund Pick Right Now?

Zacks Equity Research
FS Bancorp (FSBW) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.

Having trouble finding a Sector - Tech fund? Franklin DynaTech A (FKDNX) is a possible starting point. FKDNX possesses a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.

Objective

FKDNX is part of the Sector - Tech category, which boasts an array of different possible selections. With a much more diversified approach, Sector - Tech mutual funds give investors a way to own a stake in a notoriously risky sector. Tech companies are in various industries like semiconductors, software, internet, and networking, among others.

History of Fund/Manager

FKDNX finds itself in the Franklin Templeton family, based out of San Mateo, CA. The Franklin DynaTech A made its debut in January of 1968 and FKDNX has managed to accumulate roughly $3.38 billion in assets, as of the most recently available information. The fund is currently managed by Rupert H. Johnson who has been in charge of the fund since January of 1968.

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 13.43%, 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 21.04%, 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. FKDNX's standard deviation over the past three years is 15.6% compared to the category average of 10.54%. Looking at the past 5 years, the fund's standard deviation is 15.68% compared to the category average of 10.4%. 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 FKDNX's case, the fund lost 47.2% in the most recent bear market and outperformed its peer group by 6.11%. This might suggest that the fund is a better choice than its peers during a bear market.

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. FKDNX has a 5-year beta of 1.17, which means it is likely to be more volatile than the market average. 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. FKDNX's 5-year performance has produced a positive alpha of 1.09, which means 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 mostly on equities that are traded in the United States.

As of the last filing date, the mutual fund has 77.3% of its assets in stocks, and these companies have an average market capitalization of $248.31 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Retail Trade

This fund's turnover is about 17.22%, so the fund managers are making fewer trades than the average comparable fund.

Expenses

For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, FKDNX is a load fund. It has an expense ratio of 0.86% compared to the category average of 1.31%. FKDNX is actually cheaper than its peers when you consider factors like cost.

Investors should also note that the minimum initial investment for the product is $1,000 and that each subsequent investment has no minimum amount.

Bottom Line

Overall, Franklin DynaTech A ( FKDNX ) has a neutral Zacks Mutual Fund rank, strong performance, worse downside risk, and lower fees compared to its peers.

Want even more information about FKDNX? Then go over to Zacks.com and check out our mutual fund comparison tool, and all of the other great features that we have to help you with your mutual fund analysis 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.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Get Your Free (FKDNX): Fund Analysis Report
 
To read this article on Zacks.com click here.