Is T. Rowe Price Small Cap Value Fund (PRSVX) a Strong Mutual Fund Pick Right Now?
There are plenty of choices in the Small Cap Value category, but where should you start your research? Well, one fund that might be worth investigating is T. Rowe Price Small Cap Value Fund (PRSVX). PRSVX carries a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.
PRSVX is one of many Small Cap Value funds to choose from. Small Cap Value mutual funds typically invest in companies with market caps under $2 billion. These funds represent value because they offer more bang for an owner’s buck, often demonstrated by lower P/E Ratios, high dividend yields, and better-than-average price-to-sales ratios.
PRSVX finds itself in the T. Rowe Price family, based out of Baltimore, MD. Since T. Rowe Price Small Cap Value Fund made its debut in June of 1988, PRSVX has garnered more than $3.76 billion in assets. J. Wagner is the fund’s current manager and has held that role since June of 2014.
Investors naturally seek funds with strong performance. PRSVX has a 5-year annualized total return of 6.36%, 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 10.5%, 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. Compared to the category average of 12.42%, the standard deviation of PRSVX over the past three years is 17.6%. The fund’s standard deviation over the past 5 years is 17.84% compared to the category average of 14.13%. This makes the fund more volatile than its peers over the past half-decade.
Investors should not forget about beta, an important way to measure a mutual fund’s risk compared to the market as a whole. PRSVX has a 5-year beta of 0.94, 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. With a negative alpha of -5.94, managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
Investigating 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 primarily on equities that are traded in the United States.
This fund is currently holding about 88.23% in stocks, which have an average market capitalization of $5.30 billion. The fund has the heaviest exposure to the following market sectors:
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Finance
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Industrial Cyclical
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Other
This fund’s turnover is about 35.4%, so the fund managers are making fewer trades than its comparable peers.
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, PRSVX is a no load fund. It has an expense ratio of 0.79% compared to the category average of 0.95%. From a cost perspective, PRSVX is actually cheaper than its peers.
Investors should also note that the minimum initial investment for the product is $2,500 and that each subsequent investment needs to be at $100.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Overall, T. Rowe Price Small Cap Value Fund ( PRSVX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, T. Rowe Price Small Cap Value Fund ( PRSVX ) looks like a good potential choice for investors right now.
This could just be the start of your research on PRSVX in the Small 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. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.
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This article originally published on Zacks Investment Research (zacks.com).