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Is T. Rowe Price Diversified Mid Cap Growth (PRDMX) a Strong Mutual Fund Pick Right Now?

Any investors hoping to find a Mid Cap Growth fund could think about starting with T. Rowe Price Diversified Mid Cap Growth (PRDMX). PRDMX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

We note that PRDMX is a Mid Cap Growth fund, and this area is also loaded with many different options. Companies are usually considered growth stocks when they consistently report notable sales and/or earnings growth. Thus, Mid Cap Growth funds pick stocks--usually companies with a market cap between $2 billion and $10 billion--that demonstrate extensive growth opportunities for investors compared to their peers.

History of Fund/Manager

PRDMX finds itself in the T. Rowe Price family, based out of Baltimore, MD. The T. Rowe Price Diversified Mid Cap Growth made its debut in January of 2004 and PRDMX has managed to accumulate roughly $836 million in assets, as of the most recently available information. The fund's current manager, Donald J. Peters, has been in charge of the fund since January of 2004.

Performance

Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 14.54%, and is 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 15.15%, 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 PRDMX over the past three years is 10.98% compared to the category average of 11.55%. The fund's standard deviation over the past 5 years is 11.01% compared to the category average of 11.41%. This makes the fund less volatile than its peers over the past half-decade.

Risk Factors

Investors cannot discount the risks to this segment though, as it is always important to remember the downside for any potential investment. In PRDMX's case, the fund lost 51.81% in the most recent bear market and outperformed its peer group by 0.69%. This makes the fund a possibly better 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. 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 -0.28. This means that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

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, PRDMX is a no load fund. It has an expense ratio of 0.84% compared to the category average of 1.20%. So, PRDMX is actually cheaper than its peers from a cost perspective.

While the minimum initial investment for the product is $2,500, investors should also note that each subsequent investment needs to be at least $100.

Bottom Line

Overall, T. Rowe Price Diversified Mid Cap Growth ( PRDMX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

For additional information on this product, or to compare it to other mutual funds in the Mid Cap Growth, make sure to go to www.zacks.com/funds/mutual-funds for additional information. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.

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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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