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Is American Funds Washington Mutual Investors A (AWSHX) a Strong Mutual Fund Pick Right Now?

There are plenty of choices in the Large Cap Value category, but where should you start your research? Well, one fund that might be worth investigating is American Funds Washington Mutual Investors A (AWSHX). AWSHX bears a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

Large Cap Value mutual funds invest in stocks with a market capitalization of $10 billion or more, but whose share prices do not reflect their intrinsic value; this value investing strategy often leads to low P/E ratios and high dividend yields, though growth levels are often curtailed. The high-growth opportunity of these funds are slowed even further, as large-cap securities are generally in stable industries with low to moderate growth prospects. Therefore, Large Cap Value funds are usually more appealing to investors who are interested in a stable income stream.

History of Fund/Manager

American Funds is based in Los Angeles, CA, and is the manager of AWSHX. American Funds Washington Mutual Investors A debuted in July of 1952. Since then, AWSHX has accumulated assets of about $55.63 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 has delivered a 5-year annualized total return of 9.92%, 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 13.57%, 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. Over the past three years, AWSHX's standard deviation comes in at 9.71%, compared to the category average of 9.25%. Over the past 5 years, the standard deviation of the fund is 10.22% compared to the category average of 9.17%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

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 AWSHX's case, the fund lost 48.94% in the most recent bear market and outperformed its peer group by 1.79%. This makes the fund a possibly better choice than its peers during a sliding market environment.

Nevertheless, with a 5-year beta of 0.89, the fund is likely to be less volatile than the market average. 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. AWSHX's 5-year performance has produced a positive alpha of 0.13, which means 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 mostly on equities that are traded in the United States.

The mutual fund currently has 95.73% of its holdings in stocks, with an average market capitalization of $185.22 billion. The fund has the heaviest exposure to the following market sectors:

  1. Finance
  2. Technology
  3. Industrial Cyclical

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, AWSHX is a load fund. It has an expense ratio of 0.57% compared to the category average of 1%. Looking at the fund from a cost perspective, AWSHX is actually cheaper than its peers.

This fund requires a minimum initial investment of $250, and each subsequent investment should be at least $50.

Bottom Line

Overall, American Funds Washington Mutual Investors A ( AWSHX ) has a high Zacks Mutual Fund rank, strong performance, average downside risk, and lower fees compared to its peers.

This could just be the start of your research on AWSHXin the Large Cap Value category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well 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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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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