Is American Funds Inc Fnd of Amer A (AMECX) a strong mutual fund pick right now?

If you’ve been stuck searching for Large Cap Value funds, consider American Funds Inc Fnd of Amer A (AMECX) as a possibility. AMECX carries 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 is 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 based in Los Angeles, CA, and is the manager of AMECX. American Funds Inc Fnd of Amer A debuted in December of 1970. Since then, AMECX has accumulated assets of about $80.22 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 carries a 5-year annualized total return of 10.54%, 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 12.15%, which places it in the middle 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. Over the past three years, AMECX’s standard deviation comes in at 9.05%, compared to the category average of 11.75%. Looking at the past 5 years, the fund’s standard deviation is 10.6% compared to the category average of 13.08%. This makes the fund less 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. AMECX has a 5-year beta of 0.58, which means it is likely to be less volatile than the market average. 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. The fund has produced a negative alpha over the past 5 years of -0.87, which shows that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

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, AMECX is a load fund. It has an expense ratio of 0.56% compared to the category average of 0.94%. Looking at the fund from a cost perspective, AMECX is actually cheaper than its peers.

Investors should also note that the minimum initial investment for the product is $250 and that each subsequent investment needs to be at $50.

Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.

Bottom line

Overall, American Funds Inc Fnd of Amer A ( AMECX ) 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.