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Is PGIM Financial Services A (PFSAX) a Strong Mutual Fund Pick Right Now?

If you've been stuck searching for Sector - Finance funds, you might want to consider passing on by PGIM Financial Services A (PFSAX) as a possibility. PFSAX holds a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

PFSAX is classified in the Sector - Finance segment by Zacks, and this area is full of possibilities. The financial space is notoriously large, complex, and heavily-regulated, and Sector - Finance mutual funds give investors a stable, diversified approach to investing in this industry. These funds can include everything from banks and investment giants to exchanges and insurance companies, though investors should note that interest rates could have a big impact.

History of Fund/Manager

PGIM is based in Providence, RI, and is the manager of PFSAX. PGIM Financial Services A debuted in June of 1999. Since then, PFSAX has accumulated assets of about $74.70 million, 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. PFSAX has a 5-year annualized total return of 17.6% and it sits in the top third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 14.48%, 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. The standard deviation of PFSAX over the past three years is 26.02% compared to the category average of 18.05%. The fund's standard deviation over the past 5 years is 20.73% compared to the category average of 14.91%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. PFSAX has a 5-year beta of 1.24, which means it is likely to be more volatile than 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. PFSAX has generated a negative alpha over the past five years of -2.91, demonstrating 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 largely on equities that are traded in the United States.

The mutual fund currently has 76.32% of its holdings in stocks, with an average market capitalization of $136.91 billion. This fund's turnover is about 38%, so the fund managers are making fewer trades than comparable funds.

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, PFSAX is a load fund. It has an expense ratio of 1.39% compared to the category average of 1.54%. Looking at the fund from a cost perspective, PFSAX is actually cheaper than its peers.

This fund requires a minimum initial investment of $1,000, and each subsequent investment should be at least $100.

Bottom Line

Overall, PGIM Financial Services A ( PFSAX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, worse downside risk, and lower fees, this fund looks like a somewhat weak choice for investors right now.

For additional information on the Sector - Finance 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 PFSAX too for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.


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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.

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