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Is American Funds Growth Fund of America C (GFACX) a Strong Mutual Fund Pick Right Now?

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Large Cap Growth fund seekers may want to consider taking a look at American Funds Growth Fund of America C (GFACX). GFACX has a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.

Objective

GFACX is part of the Large Cap Growth section, and this segment boasts an array of other possible options. Large Cap Growth mutual funds purchase stakes in numerous large U.S. companies that are expected to develop and grow at a faster rate than other large-cap stocks. Companies are usually considered to be large-cap if their market capitalization is over $10 billion.

History of Fund/Manager

American Funds is based in Los Angeles, CA, and is the manager of GFACX. The American Funds Growth Fund of America C made its debut in March of 2001 and GFACX has managed to accumulate roughly $4.95 billion in assets, as of the most recently available information. The fund's current manager is a team of investment professionals.

Performance

Investors naturally seek funds with strong performance. GFACX has a 5-year annualized total return of 10.4% and is in the middle third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 11.48%, 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 8.69%, the standard deviation of GFACX over the past three years is 11.25%. Looking at the past 5 years, the fund's standard deviation is 11.11% compared to the category average of 8.83%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

One cannot ignore the volatility of this segment, however, as it is always important for investors to remember the downside to any potential investment. In GFACX's case, the fund lost 49.3% in the most recent bear market and underperformed comparable funds by 0.52%. These results could imply that the fund is a worse choice than its peers during a sliding market environment.

Even still, the fund has a 5-year beta of 1.03, so investors should note that it is hypothetically as volatile as 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. The fund has produced a negative alpha over the past 5 years of -0.87, which shows that managers in this portfolio find it difficult to pick 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 largely on equities that are traded in the United States.

Right now, 90.33% of this mutual fund's holdings are stocks, which have an average market capitalization of $245.35 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Other
  3. Finance
  4. Retail Trade

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, GFACX is a no load fund. It has an expense ratio of 1.42% compared to the category average of 1.10%. Looking at the fund from a cost perspective, GFACX is actually more expensive than its peers.

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 Growth Fund of America C ( GFACX ) has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and higher fees, this fund looks like a somewhat average choice for investors right now.

Don't stop here for your research on Large Cap Growth funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare GFACX to its peers 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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