Large Cap Growth fund seekers should not consider taking a look at American Century Ultra Investor (TWCUX) at this time. TWCUX has a Zacks Mutual Fund Rank of 4 (Sell), which is based on various forecasting factors like size, cost, and past performance.
TWCUX is classified in the Large Cap Growth segment by Zacks, an area full of possibilities. Companies are usually considered to be large-cap if their stock market valuation is more than $10 billion. Large Cap Growth mutual funds invest in many large U.S. firms that are projected to grow at a faster rate than their large-cap peers.
American Century is based in Kansas City, MO, and is the manager of TWCUX. American Century Ultra Investor debuted in November of 1981. Since then, TWCUX has accumulated assets of about $23.25 billion, according to the most recently available information. The fund’s current manager is a team of investment professionals.
Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 13.14%, and is in the middle 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 24.32%, which places it in the middle third during this time-frame.
It is important to note that the product’s returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund’s [%] sale charge. If sales charges were included, total returns would have been lower.
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. TWCUX’s standard deviation over the past three years is 17.05% compared to the category average of 12.16%. Looking at the past 5 years, the fund’s standard deviation is 19.71% compared to the category average of 13.9%. This makes the fund more volatile than its peers over the past half-decade.
Investors should note that the fund has a 5-year beta of 1.21, so it is likely going to be more volatile than 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. Over the past 5 years, the fund has a negative alpha of -3.57. This means 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 primarily on equities that are traded in the United States.
Right now, 88.86% of this mutual fund’s holdings are stocks, and these companies have an average market capitalization of $652.78 billion. The fund has the heaviest exposure to the following market sectors:
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Technology
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Retail Trade
Turnover is 10%, which means this fund makes fewer trades than the average comparable fund.
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, TWCUX is a no load fund. It has an expense ratio of 0.89% compared to the category average of 0.95%. TWCUX 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 $50.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Overall, American Century Ultra Investor ( TWCUX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, worse downside risk, and lower fees, this fund looks like a somewhat weak 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 TWCUX too for additional information. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.
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This article originally published on Zacks Investment Research (zacks.com).