Having trouble finding a Large Cap Value fund? T. Rowe Price Equity Income Fund PRFDX is a potential starting point. PRFDX has a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
History of Fund/Manager
PRFDX is a part of the T. Rowe Price family of funds, a company based out of Baltimore, MD. T. Rowe Price Equity Income Fund debuted in October of 1985. Since then, PRFDX has accumulated assets of about $18.37 billion, according to the most recently available information. The fund's current manager, John D. Linehan, has been in charge of the fund since November of 2015.
Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 12.44%, and is in the bottom third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 12.18%, 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. PRFDX's standard deviation over the past three years is 10.84% compared to the category average of 9.14%. Looking at the past 5 years, the fund's standard deviation is 9.98% compared to the category average of 9.89%. This makes the fund more volatile than its peers over the past half-decade.
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. In the most recent bear market, PRFDX lost 52.57% and underperformed its peer group by 2.4%. This makes the fund a possibly worse choice than its peers during a sliding market environment.
Investors should note that the fund has a 5-year beta of 0.99, so it is likely going to be as volatile as the market at large. Another factor to consider is alpha, as it reflects a portfolio's performance on a risk-adjusted basis relative to a benchmark-in this case, the S&P 500. The fund has produced a negative alpha over the past 5 years of -2.87, which shows that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
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 primarily on equities that are traded in the United States.
This fund is currently holding about 89.85% stock in stocks, which have an average market capitalization of $118.16 billion. The fund has the heaviest exposure to the following market sectors:
- Industrial Cyclical
Turnover is about 19.4%, so those in charge of the fund make fewer trades than the average comparable fund.
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, PRFDX is a no load fund. It has an expense ratio of 0.65% compared to the category average of 1.04%. Looking at the fund from a cost perspective, PRFDX is actually cheaper than its peers.
Investors should also note that the minimum initial investment for the product is $2,500 and that each subsequent investment needs to be at $100.
Overall, T. Rowe Price Equity Income Fund has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, this fund looks like a great potential choice for investors right now.
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