Any investors hoping to find a Small Cap Value fund could think about starting with T. Rowe Price Small Cap Value Fund (PRSVX). PRSVX possesses a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
PRSVX is one of many Small Cap Value funds to choose from. Small Cap Value mutual funds typically invest in companies with market caps under $2 billion. These funds represent value because they offer more bang for an owner's buck, often demonstrated by lower P/E Ratios, high dividend yields, and better-than-average price-to-sales ratios.
History of Fund/Manager
T. Rowe Price is based in Baltimore, MD, and is the manager of PRSVX. T. Rowe Price Small Cap Value Fund made its debut in June of 1988, and since then, PRSVX has accumulated about $6.71 billion in assets, per the most up-to-date date available. J. David Wagner is the fund's current manager and has held that role since June of 2014.
Performance
Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund in particular has delivered a 5-year annualized total return of 7.35%, and it sits in the top third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 8.89%, 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. The standard deviation of PRSVX over the past three years is 15.75% compared to the category average of 12.18%. The standard deviation of the fund over the past 5 years is 14.74% compared to the category average of 11.95%. This makes the fund more volatile than its peers over the past half-decade.
Risk Factors
Investors cannot discount the risks to this segment though, as it is always important to remember the downside for any potential investment. In PRSVX's case, the fund lost 47.38% in the most recent bear market and outperformed its peer group by 4%. This might suggest that the fund is a better 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. PRSVX has a 5-year beta of 1.03, which means it is likely to be as volatile as 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. PRSVX's 5-year performance has produced a negative alpha of -2.42, which means managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
Holdings
Exploring 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.
The mutual fund currently has 97.47% of its holdings in stocks, with an average market capitalization of $3.24 billion. The fund has the heaviest exposure to the following market sectors:
- Finance
- Industrial Cyclical
- Other
Turnover is 19.3%, which means, on average, the fund makes fewer trades than comparable funds.
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, PRSVX is a no load fund. It has an expense ratio of 0.78% compared to the category average of 1.29%. PRSVX is actually cheaper than its peers when you consider factors like cost.
Investors need to be aware that with this product, the minimum initial investment is $2,500; each subsequent investment needs to be at least $100.
Bottom Line
Overall, T. Rowe Price Small Cap Value Fund ( PRSVX ) 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.
Want even more information about PRSVX? Then go over to Zacks.com and check out our mutual fund comparison tool, and all of the other great features that we have to help you with your mutual fund analysis 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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