Is Invesco American Franchise A (VAFAX) a Strong Mutual Fund Pick Right Now?

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If investors are looking at the Large Cap Growth fund category, make sure to pass over Invesco American Franchise A (VAFAX). VAFAX carries a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

VAFAX is part of the Large Cap Growth section, and this segment boasts an array of other possible options. Large Cap Growth mutual funds purchase stakes in numerous large U.S. companies that are expected to develop and grow at a faster rate than other large-cap stocks. Companies are usually considered to be large-cap if their market capitalization is over $10 billion.

History of Fund/Manager

VAFAX finds itself in the Invesco family, based out of Kansas City, MO. Since Invesco American Franchise A made its debut in June of 2005, VAFAX has garnered more than $15.67 billion in assets. The fund is currently managed by Ido Cohen who has been in charge of the fund since June of 2010.

Performance

Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 21.51%, 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 22.68%, which places it in the middle 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. Over the past three years, VAFAX’s standard deviation comes in at 20.85%, compared to the category average of 15.86%. Over the past 5 years, the standard deviation of the fund is 17.12% compared to the category average of 13.07%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

With a 5-year beta of 1.05, the fund is likely to be more 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. Over the past 5 years, the fund has a positive alpha of 3. This means that managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

Holdings

Examining 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 95.83% stock in stocks, with an average market capitalization of $361.20 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology

  2. Retail Trade

Turnover is about 52%, so those in charge of the fund make fewer trades than its comparable peers.

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, VAFAX is a load fund. It has an expense ratio of 0.98% compared to the category average of 1.02%. So, VAFAX is actually cheaper than its peers from a cost perspective.

While the minimum initial investment for the product is $1,000, investors should also note that each subsequent investment needs to be at least $50.

Bottom Line

Overall, Invesco American Franchise A ( VAFAX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, Invesco American Franchise A ( VAFAX ) looks like a somewhat weak choice for investors right now.

This could just be the start of your research on VAFAXin the Large Cap Growth 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. 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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