Technology

Is State Farm Growth Fund (STFGX) a Strong Mutual Fund Pick Right Now?

If you have been looking for Large Cap Blend fund category, a potential starting could be State Farm Growth Fund (STFGX). STFGX has a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.

Objective

We note that STFGX is a Large Cap Blend option, an area loaded with different options. More often than not, Large Cap Blend mutual funds invest in companies with a market cap of over $10 billion. Buying stakes in bigger companies offer these funds more stability, and are well-suited for investors with a " buy and hold " mindset. Additionally, blended funds mix large, more established firms into their portfolios, giving investors exposure to value and growth opportunities.

History of Fund/Manager

STFGX finds itself in the State Farm family, based out of Bloomington, IL. State Farm Growth Fund made its debut in March of 1975, and since then, STFGX has accumulated about $4.91 billion in assets, per the most up-to-date date available. The fund's current manager, Paul Eckley, has been in charge of the fund since January of 1991.

Performance

Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 6.79%, 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 8.47%, which places it in the bottom 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 STFGX over the past three years is 10.27% compared to the category average of 11.21%. Over the past 5 years, the standard deviation of the fund is 10.25% compared to the category average of 11.63%. This makes the fund less 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. STFGX lost 42.39% in the most recent bear market and outperformed its peer group by 6.98%. This could mean that the fund is a better choice than comparable funds during a bear market.

Investors should note that the fund has a 5-year beta of 0.84, so it is likely going to be less 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. Over the past 5 years, the fund has a negative alpha of -1.34. 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 mostly on equities that are traded in the United States.

Currently, this mutual fund is holding 81.43% stock in stocks, and these companies have an average market capitalization of $219.41 billion. The fund has the heaviest exposure to the following market sectors:

  1. Industrial Cyclical
  2. Non-Durable
  3. Health
  4. Technology

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, STFGX is a no load fund. It has an expense ratio of 0.12% compared to the category average of 0.96%. From a cost perspective, STFGX is actually cheaper than its peers.

Investors need to be aware that with this product, the minimum initial investment is $250; each subsequent investment needs to be at least $50.

Bottom Line

Overall, State Farm Growth Fund ( STFGX ) has a neutral Zacks Mutual Fund rank, similar performance, average downside risk, and lower fees compared to its peers.

Don't stop here for your research on Large Cap Blend 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 STFGX 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.

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