Is Principal Large Cap Growth I Institutional (PLGIX) A Strong Mutual Fund Pick Right Now?

Having trouble finding a Large Cap Growth fund? Principal Large Cap Growth I Institutional PLGIX is a potential starting point. PLGIX carries a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

PLGIX 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

PLGIX finds itself in the Principal Financial Group (NASDAQ:PFG) family, based out of Des Moines, IA. Principal Large Cap Growth I Institutional made its debut in November of 2000, and since then, PLGIX has accumulated about $2.21 billion in assets, per the most up-to-date date available. The fund is currently managed by Randy L. Welch who has been in charge of the fund since March of 2013.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of 15.92%, 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 13.7%, 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. PLGIX's standard deviation over the past three years is 12.33% compared to the category average of 9.08%. Looking at the past 5 years, the fund's standard deviation is 11.41% compared to the category average of 8.95%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

It's always important to be aware of the downsides to any future investment, so one should not discount the risks that come with this segment. PLGIX lost 50.94% in the most recent bear market and underperformed comparable funds by 1.92%. This might suggest that the fund is a worse choice than its peers during a bear market.

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. PLGIX has a 5-year beta of 1.03, which means it is likely to be as volatile as 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. PLGIX's 5-year performance has produced a positive alpha of 2.13, which means 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.

As of the last filing date, the mutual fund has 85.13% of its assets in stocks, which have an average market capitalization of $196.92 billion. The fund has the heaviest exposure to the following market sectors:

1. Technology
2. Finance

With turnover at about 38.5%, this fund makes fewer trades than comparable funds.

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, PLGIX is a no load fund. It has an expense ratio of 0.63% compared to the category average of 1.11%. Looking at the fund from a cost perspective, PLGIX is actually cheaper than its peers.

Investors need to be aware that with this product, the minimum initial investment is $0; each subsequent investment has no minimum amount.

Bottom Line

Overall, Principal Large Cap Growth I Institutional 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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