Is T. Rowe Price Equity Income Fund (PRFDX) a Strong Mutual Fund Pick Right Now?

If you have been looking for Large Cap Value funds, a place to start could be T. Rowe Price Equity Income Fund (PRFDX). PRFDX has a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.

PRFDX is one of many Large Cap Value mutual funds to choose from. These funds invest in equities with a market capitalization of $10 billion or more, but whose share prices do not reflect their intrinsic value. This strategy can often produce low P/E ratios and high dividend yields; growth levels; however, growth levels are oftentimes cut back. These funds’high growth opportunities are slowed even more since large-cap stocks are usually in more stable industries with low to moderate growth prospects. Thus, investors interested in a stable income stream fund Large Cap Value funds very appealing.

T. Rowe Price is based in Baltimore, MD, and is the manager of PRFDX. Since T. Rowe Price Equity Income Fund made its debut in October of 1985, PRFDX has garnered more than $8 billion in assets. The fund is currently managed by John Linehan who has been in charge of the fund since November of 2015.

Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 17.02%, and it sits 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 6.36%, which places it in the bottom 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. PRFDX’s standard deviation over the past three years is 16.61% compared to the category average of 14.58%. Looking at the past 5 years, the fund’s standard deviation is 16.62% compared to the category average of 15.72%. This makes the fund more volatile than its peers over the past half-decade.

The fund has a 5-year beta of 0.83, so investors should note that it is hypothetically less volatile than the market at large. Another factor to consider is alpha, as it reflects a portfolio’s performance on a risk-adjusted basis relative to a benchmark-in this case, the S&P 500. PRFDX’s 5-year performance has produced a positive alpha of 1.3, which means managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.