Mid Cap Growth fund seekers should consider taking a look at Parnassus Mid-Cap Fund (PARMX). PARMX carries a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.
Zacks categorizes PARMX as Mid Cap Growth, a segment packed with options. Mid Cap Growth mutual funds aim to target companies with a market capitalization between $2 billion and $10 billion that are also expected to exhibit more extensive growth opportunities for investors than their peers. A firm is typically considered to be a growth stock if it consistently posts impressive sales and/or earnings growth.
History of Fund/Manager
PARMX is a part of the Parnassus family of funds, a company based out of San Francisco, CA. The Parnassus Mid-Cap Fund made its debut in April of 2005 and PARMX has managed to accumulate roughly $2.75 billion in assets, as of the most recently available information. The fund is currently managed by Matthew Gershuny who has been in charge of the fund since October of 2008.
Obviously, what investors are looking for in these funds is strong performance relative to their peers. PARMX has a 5-year annualized total return of 12.95% and is in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 14.56%, which places it in the top 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. PARMX’s standard deviation over the past three years is 18.75% compared to the category average of 18.77%. The standard deviation of the fund over the past 5 years is 14.99% compared to the category average of 15.37%. This makes the fund less volatile than its peers over the past half-decade.
Investors should note that the fund has a 5-year beta of 0.93, which means 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. The fund has produced a negative alpha over the past 5 years of -2.5, which shows that 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 mostly on equities that are traded in the United States.
The mutual fund currently has 81.14% of its holdings in stocks, with an average market capitalization of $24.79 billion. The fund has the heaviest exposure to the following market sectors:
- Industrial Cyclical
- Retail Trade
This fund’s turnover is about 41%, so the fund managers are making fewer trades than its comparable peers.
Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, PARMX is a no load fund. It has an expense ratio of 0.98% compared to the category average of 1.18%. Looking at the fund from a cost perspective, PARMX is actually cheaper than its peers.
This fund requires a minimum initial investment of $2,000, and each subsequent investment should be at least $50.
Overall, Parnassus Mid-Cap Fund ( PARMX ) 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.
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