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Is Parnassus Core Equity Fund (PRBLX) a Strong Mutual Fund Pick Right Now?

Zacks Equity Research
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There are plenty of choices in the Large Cap Value category, but where should you start your research? Well, one fund that may not be worth investigating is Parnassus Core Equity Fund (PRBLX). PRBLX carries a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

PRBLX is classified in the Large Cap Value segment by Zacks, which is an area full of possibilities. Investors interested in a stable income stream fund these mutual funds very appealing because they have a unique investing strategy. Large Cap Value funds invest in stocks with a market capitalization of $10 billion or more, but whose share prices do not reflect their intrinsic value. This tactic often leads to low P/E ratios and high dividend yields; however, these funds'high growth opportunity are often slowed, as large-cap securities are generally in stable industries with low to moderate growth prospects.

History of Fund/Manager

Parnassus is responsible for PRBLX, and the company is based out of San Francisco, CA. Since Parnassus Core Equity Fund made its debut in September of 1992, PRBLX has garnered more than $9.36 billion in assets. The fund is currently managed by Todd C. Ahlsten who has been in charge of the fund since May of 2001.

Performance

Of course, investors look for strong performance in funds. This fund has delivered a 5-year annualized total return of 13.08%, 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 13.42%, 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 PRBLX over the past three years is 8.58% compared to the category average of 9.66%. Looking at the past 5 years, the fund's standard deviation is 8.99% compared to the category average of 9.35%. This makes the fund less 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. In PRBLX's case, the fund lost 35.6% in the most recent bear market and underperformed comparable funds by 14.71%. This means that the fund could possibly be a worse choice than its peers during a down market environment.

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. PRBLX has a 5-year beta of 0.88, which means it is likely to be less 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. Over the past 5 years, the fund has a positive alpha of 0.28. This means that managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

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, PRBLX is a no load fund. It has an expense ratio of 0.86% compared to the category average of 1.03%. So, PRBLX is actually cheaper than its peers from a cost perspective.

While the minimum initial investment for the product is $2,000, investors should also note that each subsequent investment needs to be at least $50.

Bottom Line

Overall, Parnassus Core Equity Fund ( PRBLX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a somewhat weak choice for investors right now.

This could just be the start of your research on PRBLXin the Large Cap Value category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well for additional information. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.


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