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Is Vanguard Energy Admiral (VGELX) a Strong Mutual Fund Pick Right Now?

Zacks Equity Research

If you have been looking for Sector - Energy funds, a place to start could be Vanguard Energy Admiral (VGELX). VGELX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

VGELX is one of many Sector - Energy funds to choose from. Sector - Energy mutual funds are comprised of various changing and hugely important industries throughout the massive global energy sector. Even though clean energy is beginning to pick up steam, oil and gas companies have the highest exposure, but carbon-based fuels will be the biggest group of assets in these funds.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VGELX. Vanguard Energy Admiral made its debut in November of 2001, and since then, VGELX has accumulated about $5.41 billion in assets, per the most up-to-date date available. The fund's current manager is a team of investment professionals.

Performance

Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of -5.29%, and it sits in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 2.14%, 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. Compared to the category average of 14.43%, the standard deviation of VGELX over the past three years is 17.49%. The standard deviation of the fund over the past 5 years is 19.78% compared to the category average of 15.73%. This makes the fund more 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 the most recent bear market, VGELX lost 48.42% and outperformed its peer group by 7%. This means that the fund could possibly be a better 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. VGELX has a 5-year beta of 1.06, which means it is likely to be more 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. With a negative alpha of -14.05, managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

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, VGELX is a no load fund. It has an expense ratio of 0.29% compared to the category average of 1.48%. VGELX is actually cheaper than its peers when you consider factors like cost.

Investors need to be aware that with this product, the minimum initial investment is $50,000; each subsequent investment needs to be at least $1.

Bottom Line

Overall, Vanguard Energy Admiral ( VGELX ) 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.

Don't stop here for your research on Sector - Energy funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare VGELX to its peers 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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