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Is Parnassus Endeavor Fund (PARWX) a Strong Mutual Fund Pick Right Now?

Zacks Equity Research
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If you have been looking for Large Cap Growth funds, it would not be wise to start your search with Parnassus Endeavor Fund (PARWX). PARWX bears a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

PARWX is classified in the Large Cap Growth segment by Zacks, an area full of possibilities. Companies are usually considered to be large-cap if their stock market valuation is more than $10 billion. Large Cap Growth mutual funds invest in many large U.S. firms that are projected to grow at a faster rate than their large-cap peers.

History of Fund/Manager

Parnassus is based in San Francisco, CA, and is the manager of PARWX. Parnassus Endeavor Fund debuted in April of 2005. Since then, PARWX has accumulated assets of about $2.76 billion, according to the most recently available information. Jerome L. Dodson is the fund's current manager and has held that role since April of 2005.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund in particular has delivered a 5-year annualized total return of 12.22%, and it sits in the middle third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 15.33%, which places it in the middle 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 PARWX over the past three years is 16.14% compared to the category average of 11.06%. Over the past 5 years, the standard deviation of the fund is 14.51% compared to the category average of 10.83%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should always remember the downsides to a potential investment, and this segment carries some risks one should be aware of. In PARWX's case, the fund lost 43.15% in the most recent bear market and outperformed its peer group by 5.69%. This could mean that the fund is a better choice than comparable funds during a bear market.

Even still, the fund has a 5-year beta of 1.18, so investors should note that it is hypothetically more volatile than the market at large. 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 negative alpha of -0.25. This means that 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.

As of the last filing date, the mutual fund has 81.22% of its assets in stocks, which have an average market capitalization of $90.37 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Retail Trade
  3. Services

With turnover at about 55.9%, this fund makes more trades in a given year than the category average.

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, PARWX is a no load fund. It has an expense ratio of 0.94% compared to the category average of 1.05%. From a cost perspective, PARWX is actually cheaper than its peers.

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 Endeavor Fund ( PARWX ) has a low Zacks Mutual Fund rank, similar performance, average downside risk, and lower fees compared to its peers.

For additional information on this product, or to compare it to other mutual funds in the Large Cap Growth, make sure to go to www.zacks.com/funds/mutual-funds for additional information. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.


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