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Is American Funds Fundamental Investors A (ANCFX) a Strong Mutual Fund Pick Right Now?

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Large Cap Blend fund seekers should not consider taking a look at American Funds Fundamental Investors A (ANCFX) at this time. ANCFX carries a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

ANCFX is part of the Large Cap Blend section, an area that boasts an array of many possible options. Large Cap Blend mutual funds most often invest in firms with a market capitalization of $10 billion or more. By investing in bigger companies, these funds offer more stability, and are often well-suited for investors with a " buy and hold " mindset. Blended funds mix large, established companies into their holdings, which gives investors exposure to both value and growth at the same time.

History of Fund/Manager

American Funds is based in Los Angeles, CA, and is the manager of ANCFX. The American Funds Fundamental Investors A made its debut in July of 1978 and ANCFX has managed to accumulate roughly $53.29 billion in assets, as of the most recently available information. A team of investment professionals is the fund's current manager.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund in particular has delivered a 5-year annualized total return of 12.57%, and is 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 16.71%, 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 8.82%, the standard deviation of ANCFX over the past three years is 9.35%. The standard deviation of the fund over the past 5 years is 9.77% compared to the category average of 8.61%. 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. ANCFX lost 50.05% in the most recent bear market and outperformed its peer group by 0.38%. This might suggest that the fund is a better choice than its peers during a bear market.

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. ANCFX has a 5-year beta of 0.99, which means it is likely to be as volatile as the market average. 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. Over the past 5 years, the fund has a negative alpha of -1.11. This means that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Holdings

Exploring 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.

The mutual fund currently has 76.65% of its holdings in stocks, which have an average market capitalization of $217.88 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Finance
  3. Other
  4. Industrial Cyclical

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, ANCFX is a load fund. It has an expense ratio of 0.58% compared to the category average of 1%. ANCFX is actually cheaper than its peers when you consider factors like cost.

While the minimum initial investment for the product is $250, investors should also note that each subsequent investment needs to be at least $50.

Bottom Line

Overall, American Funds Fundamental Investors A ( ANCFX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, American Funds Fundamental Investors A ( ANCFX ) looks like a somewhat weak choice for investors right now.

For additional information on the Large 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 ANCFX 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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