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

There are plenty of choices in the Large Cap Value category, but where should you start your research? Well, one fund that might be worth investigating is Parnassus Core Equity Fund (PRBLX). PRBLX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

Large Cap Value mutual funds invest in stocks with a market capitalization of $10 billion or more, but whose share prices do not reflect their intrinsic value; this value investing strategy often leads to low P/E ratios and high dividend yields, though growth levels are often curtailed. The high-growth opportunity of these funds are slowed even further, as large-cap securities are generally in stable industries with low to moderate growth prospects. Therefore, Large Cap Value funds are usually more appealing to investors who are interested in a stable income stream.

History of Fund/Manager

Parnassus is based in San Francisco, CA, and is the manager of PRBLX. Parnassus Core Equity Fund made its debut in September of 1992, and since then, PRBLX has accumulated about $9.36 billion in assets, per the most up-to-date date available. Todd C. Ahlsten is the fund's current manager and has held that role since May of 2001.

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 10.38%, 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 13.26%, 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. Over the past three years, PRBLX's standard deviation comes in at 10.95%, compared to the category average of 11.01%. Over the past 5 years, the standard deviation of the fund is 10.61% compared to the category average of 10.95%. This makes the fund less 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. PRBLX lost 35.6% in the most recent bear market and outperformed its peer group by 15%. This means that the fund could possibly be a better choice than its peers during a down market environment.

Investors should note that the fund has a 5-year beta of 0.85, so it is likely going to be less 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. The fund has produced a positive alpha over the past 5 years of 1.51, which shows that 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 largely on equities that are traded in the United States.

Currently, this mutual fund is holding 77.74% stock in stocks, which have an average market capitalization of $144.98 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology

  2. Industrial Cyclical

  3. Non-Durable

  4. Other

  5. Finance

Turnover is 31.43%, which means, on average, the fund makes 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, PRBLX is a no load fund. It has an expense ratio of 0.87% compared to the category average of 1.01%. Looking at the fund from a cost perspective, PRBLX is actually cheaper than its peers.

This fund requires a minimum initial investment of $2,000, and each subsequent investment should be at least $50.

Bottom Line

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

Your research on the Large Cap Value segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer 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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