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Is Vanguard PRIMECAP Fund Investor (VPMCX) a Strong Mutual Fund Pick Right Now?

Zacks Equity Research
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Any investors hoping to find a Large Cap Growth fund could think about starting with Vanguard PRIMECAP Fund Investor (VPMCX). VPMCX possesses a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

We classify VPMCX in the Large Cap Growth category, an area rife with potential choices. Large Cap Growth funds invest in many large U.S. companies that are expected to grow much faster compared to other large-cap stocks. To be considered large-cap, companies must have a market cap over $10 billion.

History of Fund/Manager

Vanguard Group is responsible for VPMCX, and the company is based out of Malvern, PA. Vanguard PRIMECAP Fund Investor debuted in November of 1984. Since then, VPMCX has accumulated assets of about $6.16 billion, according to the most recently available information. A team of investment professionals is the fund's current manager.

Performance

Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 12.21%, and it sits in the top 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 17.55%, 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 11.06%, the standard deviation of VPMCX over the past three years is 13.11%. Looking at the past 5 years, the fund's standard deviation is 12.94% 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 cannot discount the risks to this segment though, as it is always important to remember the downside for any potential investment. VPMCX lost 44.35% in the most recent bear market and outperformed its peer group by 4.49%. These results could imply that the fund is a better choice than its peers during a sliding market environment.

Investors should note that the fund has a 5-year beta of 1.09, so it is likely going to be 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. With a positive alpha of 0.38, 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 primarily on equities that are traded in the United States.

Currently, this mutual fund is holding 95.85% stock in stocks, with an average market capitalization of $181.12 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Industrial Cyclical
  3. Health

This fund's turnover is about 8%, so the fund managers are making fewer trades than the average comparable fund.

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, VPMCX is a no load fund. It has an expense ratio of 0.38% compared to the category average of 1.05%. VPMCX is actually cheaper than its peers when you consider factors like cost.

While the minimum initial investment for the product is $3,000, investors should also note that each subsequent investment needs to be at least $1.

Bottom Line

Overall, Vanguard PRIMECAP Fund Investor ( VPMCX ) has a high Zacks Mutual Fund rank, strong 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 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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