Is Vanguard PRIMECAP Fund Admiral (VPMAX) a Strong Mutual Fund Pick Right Now?

·4 min read

Any investors hoping to find a Large Cap Growth fund could think about starting with Vanguard PRIMECAP Fund Admiral (VPMAX). VPMAX has a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

VPMAX is classified in the Large Cap Growth segment by Zacks, an area full of possibilities. Companies are usually considered to be large-cap if their stock market valuation is more than $10 billion. Large Cap Growth mutual funds invest in many large U.S. firms that are projected to grow at a faster rate than their large-cap peers.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VPMAX. Vanguard PRIMECAP Fund Admiral debuted in November of 2001. Since then, VPMAX has accumulated assets of about $71.43 billion, according to the most recently available information. The fund is currently managed by a team of investment professionals.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of 18.91%, 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 15.52%, which places it in the middle 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 17.08%, the standard deviation of VPMAX over the past three years is 18.75%. Over the past 5 years, the standard deviation of the fund is 15.46% compared to the category average of 14%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

The fund has a 5-year beta of 0.98, 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. VPMAX has generated a positive alpha over the past five years of 1.25, demonstrating that managers in this portfolio are skilled in picking 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.

As of the last filing date, the mutual fund has 76.74% of its assets in stocks, which have an average market capitalization of $282.66 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology

  2. Health

  3. Industrial Cyclical

  4. Retail Trade

Turnover is 8%, which means this fund makes fewer trades than comparable funds.

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, VPMAX is a no load fund. It has an expense ratio of 0.31% compared to the category average of 1.02%. VPMAX is actually cheaper than its peers when you consider factors like cost.

Investors need to be aware that with this product, the minimum initial investment is $50,000; each subsequent investment needs to be at least $1.

Bottom Line

Overall, Vanguard PRIMECAP Fund Admiral ( VPMAX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Vanguard PRIMECAP Fund Admiral ( VPMAX ) looks like a good potential choice for investors right now.

For additional information on the Large Cap Growth 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 VPMAX too 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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