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

AMRMX is one of many Large Cap Value mutual funds to choose from. These funds invest in equities with a market capitalization of $10 billion or more, but whose share prices do not reflect their intrinsic value. This strategy can often produce low P/E ratios and high dividend yields; however, growth levels are oftentimes cut back. These funds' high growth opportunities are slowed even more since large-cap stocks are usually in more stable industries with low to moderate growth prospects. Thus, investors interested in a stable income stream find Large Cap Value funds very appealing.

History of Fund/Manager

American Funds is based in Los Angeles, CA, and is the manager of AMRMX. Since American Funds Mutual Fund A made its debut in February of 1950, AMRMX has garnered more than $44.48 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 has delivered a 5-year annualized total return of 10.81%, and it sits in the middle third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 15.32%, which places it in the bottom 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 10.97%, the standard deviation of AMRMX over the past three years is 10.07%. Looking at the past 5 years, the fund's standard deviation is 12.05% compared to the category average of 12.8%. 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. AMRMX has a 5-year beta of 0.69, which means it is likely to be less volatile than the market average. Because alpha represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, one should pay attention to this metric as well. Over the past 5 years, the fund has a positive alpha of 0.17. This means that managers in this portfolio are skilled in picking 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, AMRMX is a load fund. It has an expense ratio of 0.57% compared to the category average of 0.93%. Looking at the fund from a cost perspective, AMRMX 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.

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

Bottom Line

Overall, American Funds Mutual Fund A ( AMRMX ) has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, this fund looks like a somewhat average choice for investors right now.

For additional information on this product, or to compare it to other mutual funds in the Large Cap Value, make sure to go to www.zacks.com/funds/mutual-funds for additional information. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.

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