Is American Funds AMCAP A (AMCPX) a Strong Mutual Fund Pick Right Now?

If you've been stuck searching for Large Cap Growth funds, consider American Funds AMCAP A (AMCPX) as a possibility. AMCPX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

AMCPX 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

American Funds is based in Los Angeles, CA, and is the manager of AMCPX. Since American Funds AMCAP A made its debut in May of 1967, AMCPX has garnered more than $30.20 billion in assets. The fund's current manager is a team of investment professionals.

Performance

Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 12.44%, 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 15.2%, 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. AMCPX's standard deviation over the past three years is 10.04% compared to the category average of 8.9%. Over the past 5 years, the standard deviation of the fund is 9.99% compared to the category average of 8.67%. 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. AMCPX lost 48.62% in the most recent bear market and underperformed its peer group by 0.35%. This could mean that the fund is a worse choice than comparable funds during a bear market.

Even still, the fund has a 5-year beta of 0.96, so investors should note that it is hypothetically less volatile than the market at large. Alpha is an additional metric to take into consideration, since it represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. AMCPX has generated a negative alpha over the past five years of -0.71, demonstrating 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, AMCPX is a load fund. It has an expense ratio of 0.67% compared to the category average of 1.10%. Looking at the fund from a cost perspective, AMCPX 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, American Funds AMCAP A ( AMCPX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, American Funds AMCAP A ( AMCPX ) looks like a great potential choice for investors right now.

For additional information on this product, or to compare it to other mutual funds in the Large Cap Growth, make sure to go to www.zacks.com/funds/mutual-funds for additional information. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.

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