Is USAA Small Cap Stock Fund (USCAX) a Strong Mutual Fund Pick Right Now?
Having trouble finding a Small Cap Blend fund? Well, USAA Small Cap Stock Fund (USCAX) would not be a good potential starting point right now. USCAX possesses a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on nine forecasting factors like size, cost, and past performance.
Objective
Zacks categorizes USCAX as Small Cap Blend, which is an area packed with options. Usually targeting stocks with market caps of less than $2 billion, a Small Cap Blend mutual fund lets investors diversify their funds among other kinds of small-cap equities. This can help reduce risk found in companies that have a lower stock market valuation.
History of Fund/Manager
USCAX finds itself in the USAA Group family, based out of San Antonio, TX. The USAA Small Cap Stock Fund made its debut in August of 1999 and USCAX has managed to accumulate roughly $758.06 million in assets, as of the most recently available information. The fund is currently managed by a team of investment professionals.
Performance
Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 2.79%, and it sits in the bottom 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 5.66%, 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. Over the past three years, USCAX's standard deviation comes in at 15.95%, compared to the category average of 11.5%. The standard deviation of the fund over the past 5 years is 15.18% compared to the category average of 11.46%. 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 the most recent bear market, USCAX lost 53.14% and underperformed its peer group by 0.7%. This might suggest that the fund is a worse choice than its peers during a bear market.
Even still, the fund has a 5-year beta of 1.14, so investors should note that it is hypothetically more volatile than the market at large. Alpha is an additional metric to take into consideration, since it represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. With a negative alpha of -5.85, managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
Holdings
Examining 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 principally on equities that are traded in the United States.
This fund is currently holding about 86.02% stock in stocks, with an average market capitalization of $2.39 billion. The fund has the heaviest exposure to the following market sectors:
Finance
Industrial Cyclical
Technology
Other
With turnover at about 68%, this fund is making fewer trades than comparable funds.
Expenses
As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, USCAX is a no load fund. It has an expense ratio of 1.06% compared to the category average of 1.08%. Looking at the fund from a cost perspective, USCAX is actually cheaper than its peers.
While the minimum initial investment for the product is $3,000, investors should also note that each subsequent investment needs to be at least $50.
Bottom Line
Overall, USAA Small Cap Stock Fund ( USCAX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively weak performance, average downside risk, and lower fees, USAA Small Cap Stock Fund ( USCAX ) looks like a somewhat weak choice for investors right now.
For additional information on the Small Cap Blend 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 USCAX too for additional information. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.
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