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Is T. Rowe Price Growth Stock Fund (PRGFX) a Strong Mutual Fund Pick Right Now?

Zacks Equity Research

Looking for a Large Cap Growth fund? You may want to consider T. Rowe Price Growth Stock Fund (PRGFX) as a possible option. PRGFX carries a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.

Objective

PRGFX is part of the Large Cap Growth section, and this segment boasts an array of other possible options. Large Cap Growth mutual funds purchase stakes in numerous large U.S. companies that are expected to develop and grow at a faster rate than other large-cap stocks. Companies are usually considered to be large-cap if their market capitalization is over $10 billion.

History of Fund/Manager

T. Rowe Price is based in Baltimore, MD, and is the manager of PRGFX. Since T. Rowe Price Growth Stock Fund made its debut in April of 1950, PRGFX has garnered more than $32.01 billion in assets. Joseph B. Fath is the fund's current manager and has held that role since January of 2014.

Performance

Investors naturally seek funds with strong performance. PRGFX has a 5-year annualized total return of 14.17% and is 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 18.07%, 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. PRGFX's standard deviation over the past three years is 13.63% compared to the category average of 10.32%. Over the past 5 years, the standard deviation of the fund is 13.82% compared to the category average of 10.4%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

It's always important to be aware of the downsides to any future investment, so one should not discount the risks that come with this segment. PRGFX lost 49.13% in the most recent bear market and outperformed its peer group by 0%. This makes the fund a possibly on par choice than its peers during a sliding market environment.

Nevertheless, investors should also note that the fund has a 5-year beta of 1.06, which means 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. PRGFX's 5-year performance has produced a positive alpha of 2.18, which means managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

Holdings

Investigating 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 95.52% stock in stocks, which have an average market capitalization of $236.76 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Finance
  3. Retail Trade

Turnover is 41.8%, which means this fund makes fewer trades than its comparable peers.

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, PRGFX is a no load fund. It has an expense ratio of 0.66% compared to the category average of 1.05%. PRGFX is actually cheaper than its peers when you consider factors like cost.

This fund requires a minimum initial investment of $2,500, and each subsequent investment should be at least $100.

Bottom Line

Overall, T. Rowe Price Growth Stock Fund ( PRGFX ) has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, T. Rowe Price Growth Stock Fund ( PRGFX ) looks like a somewhat average choice for investors right now.

For additional information on the Large Cap Growth area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into PRGFX too 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.


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