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Is Diamond Hill Large Cap Fund A (DHLAX) a Strong Mutual Fund Pick Right Now?

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Having trouble finding a Large Cap Blend fund? Well, Diamond Hill Large Cap Fund A (DHLAX) would not be a good potential starting point right now. DHLAX carries a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

DHLAX is classified in the Large Cap Blend segment by Zacks, which is an area full of potential. Targeting companies with market caps of more than $10 billion, Large Cap Blend mutual funds offer a stable investment choice; these funds are perfect for investors with a " buy and hold " mindset. Since blended funds mix large, more established firms into their portfolios, investors are exposed to both value and growth opportunities.

History of Fund/Manager

DHLAX is a part of the Diamond Hill family of funds, a company based out of Columbus, OH. Since Diamond Hill Large Cap Fund A made its debut in July of 2001, DHLAX has garnered more than $1.18 billion in assets. The fund's current manager is a team of investment professionals.

Performance

Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 12.42%, and it sits 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 16.8%, 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 9.17%, the standard deviation of DHLAX over the past three years is 10.91%. Over the past 5 years, the standard deviation of the fund is 10.91% compared to the category average of 8.95%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should always remember the downsides to a potential investment, and this segment carries some risks one should be aware of. DHLAX lost 48.72% in the most recent bear market and underperformed its peer group by 0.95%. This means that the fund could possibly be a worse choice than its peers during a down market environment.

Nevertheless, investors should also note that the fund has a 5-year beta of 1.07, which means it is hypothetically more volatile than 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. With a negative alpha of -2.11, 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 91.06% of its holdings in stocks, which have an average market capitalization of $153.73 billion. The fund has the heaviest exposure to the following market sectors:

  1. Finance
  2. Technology
  3. Non-Durable

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, DHLAX is a load fund. It has an expense ratio of 0.97% compared to the category average of 1%. DHLAX is actually cheaper than its peers when you consider factors like cost.

This fund requires a minimum initial investment of $2,500, while there is no minimum for each subsequent investment.

Bottom Line

Overall, Diamond Hill Large Cap Fund A ( DHLAX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, this fund looks like a somewhat weak choice for investors right now.

Want even more information about DHLAX? Then go over to Zacks.com and check out our mutual fund comparison tool, and all of the other great features that we have to help you with your mutual fund analysis 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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