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Is Vanguard Capital Value Investor (VCVLX) a Strong Mutual Fund Pick Right Now?

Mid Cap Value fund seekers should consider taking a look at Vanguard Capital Value Investor (VCVLX). VCVLX carries a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

We classify VCVLX in the Mid Cap Value category, an area rife with potential choices. Mid Cap Value mutual funds aim to target medium-sized companies that possess strong value and income opportunities for investors. A mid-cap company usually holds a market capitalization of between $2 billion and $10 billion.

History of Fund/Manager

VCVLX finds itself in the Vanguard Group family, based out of Malvern, PA. The Vanguard Capital Value Investor made its debut in December of 2001 and VCVLX has managed to accumulate roughly $800.82 million in assets, as of the most recently available information. The fund is currently managed by David W. Palmer who has been in charge of the fund since December of 2009.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. VCVLX has a 5-year annualized total return of 1.7% and it sits in the bottom 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 2.53%, 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. Compared to the category average of 11.68%, the standard deviation of VCVLX over the past three years is 14.23%. The standard deviation of the fund over the past 5 years is 14.6% compared to the category average of 11.59%. 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 VCVLX's case, the fund lost 62.69% in the most recent bear market and underperformed its peer group by 11.22%. This might suggest that the fund is a worse choice than its peers during a bear market.

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. VCVLX has a 5-year beta of 1.22, which means it is likely to be more volatile than the market average. 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. VCVLX has generated a negative alpha over the past five years of -10.15, demonstrating 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.

As of the last filing date, the mutual fund has 86.79% of its assets in stocks, with an average market capitalization of $54.72 billion. The fund has the heaviest exposure to the following market sectors:

  1. Finance
  2. Technology

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, VCVLX is a no load fund. It has an expense ratio of 0.29% compared to the category average of 1.16%. VCVLX is actually cheaper than its peers when you consider factors like cost.

This fund requires a minimum initial investment of $3,000, and each subsequent investment should be at least $1.

Bottom Line

Overall, Vanguard Capital Value Investor ( VCVLX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively weak performance, average downside risk, and lower fees, this fund looks like a great potential choice for investors right now.

Your research on the Mid Cap Value segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer 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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