If you have been looking for Large Cap Value funds, a place to start could be American Funds Washington Mutual Investors A (AWSHX). AWSHX possesses a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.
Objective
Large Cap Value mutual funds invest in stocks with a market capitalization of $10 billion or more, but whose share prices do not reflect their intrinsic value; this value investing strategy often leads to low P/E ratios and high dividend yields, though growth levels are often curtailed. The high-growth opportunity of these funds are slowed even further, as large-cap securities are generally in stable industries with low to moderate growth prospects. Therefore, Large Cap Value funds are usually more appealing to investors who are interested in a stable income stream.
History of Fund/Manager
American Funds is responsible for AWSHX, and the company is based out of Los Angeles, CA. Since American Funds Washington Mutual Investors A made its debut in July of 1952, AWSHX has garnered more than $70.40 billion in assets. The fund’s current manager is a team of investment professionals.
Performance
Obviously, what investors are looking for in these funds is strong performance relative to their peers. AWSHX has a 5-year annualized total return of 12.1% and is in the bottom third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 11.86%, which places it in the top third during this time-frame.
It is important to note that the product’s returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund’s [%] sale charge. If sales charges were included, total returns would have been lower.
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 14.43%, the standard deviation of AWSHX over the past three years is 15.13%. Looking at the past 5 years, the fund’s standard deviation is 16.49% compared to the category average of 15.36%. 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. AWSHX has a 5-year beta of 0.87, which means it is likely to be less 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. The fund has produced a negative alpha over the past 5 years of -0.55, which shows that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
Holdings
Examining 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 principally on equities that are traded in the United States.
The mutual fund currently has 85.93% of its holdings in stocks, and these companies have an average market capitalization of $330.07 billion. The fund has the heaviest exposure to the following market sectors:
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Technology
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Finance
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Non-Durable
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Industrial Cyclical
This fund’s turnover is about 30%, so the fund managers are making fewer trades than the average comparable fund.
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, AWSHX is a load fund. It has an expense ratio of 0.57% compared to the category average of 0.95%. AWSHX is actually cheaper than its peers when you consider factors like cost.
While the minimum initial investment for the product is $250, investors should also note that each subsequent investment needs to be at least $50.
Fees charged by investment advisors have not been taken into considiration. Returns would be less if those were included.
Bottom Line
Overall, even with its comparatively weak performance, average downside risk, and lower fees, American Funds Washington Mutual Investors A ( AWSHX ) has a high Zacks Mutual Fund rank, and therefore looks a great potential choice for investors right now.
This could just be the start of your research on AWSHXin the Large Cap Value category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank 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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