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Is Vanguard PRIMECAP Fund Admiral (VPMAX) a Strong Mutual Fund Pick Right Now?

Zacks Equity Research

If you've been stuck searching for Large Cap Growth funds, you might want to consider passing on by Vanguard PRIMECAP Fund Admiral (VPMAX) as a possibility. VPMAX bears a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

VPMAX 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

Vanguard Group is responsible for VPMAX, and the company is based out of Malvern, PA. Vanguard PRIMECAP Fund Admiral made its debut in November of 2001, and since then, VPMAX has accumulated about $56.81 billion in assets, per the most up-to-date date available. A team of investment professionals is the fund's current manager.

Performance

Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 10.24%, and is 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 14.28%, 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. VPMAX's standard deviation over the past three years is 14.23% compared to the category average of 11.39%. Looking at the past 5 years, the fund's standard deviation is 13.78% compared to the category average of 11.36%. 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 VPMAX's case, the fund lost 44.26% in the most recent bear market and outperformed its peer group by 5%. This might suggest that the fund is a better choice than its peers during a bear market.

Nevertheless, investors should also note that the fund has a 5-year beta of 1.1, which means 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. VPMAX's 5-year performance has produced a negative alpha of -0.57, which means 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 mostly on equities that are traded in the United States.

Currently, this mutual fund is holding 86.34% stock in stocks, which have an average market capitalization of $177.72 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Industrial Cyclical
  3. Health

With turnover at about 12%, this fund makes fewer trades than the average comparable fund.

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, VPMAX is a no load fund. It has an expense ratio of 0.31% compared to the category average of 1.05%. Looking at the fund from a cost perspective, VPMAX is actually cheaper than its peers.

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 PRIMECAP Fund Admiral ( VPMAX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, Vanguard PRIMECAP Fund Admiral ( VPMAX ) looks like a somewhat weak choice for investors right now.

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 are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.


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