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Is American Funds Growth Fund of America A (AGTHX) a Strong Mutual Fund Pick Right Now?

Mutual Fund Report for AGTHX

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This story originally appeared on Zacks

Large Cap Growth fund seekers should consider taking a look at American Funds Growth Fund of America A (AGTHX). AGTHX possesses a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.

- Zacks

Objective

We classify AGTHX in the Large Cap Growth category, an area rife with potential choices. Large Cap Growth funds invest in many large U.S. companies that are expected to grow much faster compared to other large-cap stocks. To be considered large-cap, companies must have a market cap over $10 billion.

History of Fund/Manager

AGTHX finds itself in the American Funds family, based out of Los Angeles, CA. American Funds Growth Fund of America A made its debut in December of 1973, and since then, AGTHX has accumulated about $126.90 billion in assets, per the most up-to-date date available. The fund is currently managed by a team of investment professionals.

Performance

Of course, investors look for strong performance in funds. AGTHX has a 5-year annualized total return of 20.23% and is 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 20.04%, which places it in the bottom 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. AGTHX's standard deviation over the past three years is 19.33% compared to the category average of 15.3%. Looking at the past 5 years, the fund's standard deviation is 15.67% compared to the category average of 12.62%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should note that the fund has a 5-year beta of 0.99, so it is likely going to be as volatile as the market at large. 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. AGTHX has generated a positive alpha over the past five years of 2.58, demonstrating 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 largely on equities that are traded in the United States.

This fund is currently holding about 79.47% stock in stocks, with an average market capitalization of $340.36 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Retail Trade
  3. Finance

Turnover is 24%, which means this fund makes fewer trades than the average comparable fund.

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, AGTHX is a load fund. It has an expense ratio of 0.61% compared to the category average of 1.02%. From a cost perspective, AGTHX is actually cheaper than its peers.

While the minimum initial investment for the product is $250, investors should also note that each subsequent investment needs to be at least $50.

Bottom Line

Overall, American Funds Growth Fund of America A ( AGTHX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, this fund looks like a great potential choice for investors right now.

For additional information on the Large Cap Growth area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into AGTHX too 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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