Is Invesco Discovery Y (ODIYX) a Strong Mutual Fund Pick Right Now?

On the lookout for a Small Cap Growth fund? Starting with Invesco Discovery Y (ODIYX) is one possibility. ODIYX possesses a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

The world of Small Cap Growth funds is an area filled with options, such as ODIYX. These funds tend to create their portfolios around stocks that sport large growth opportunities and market capitalization of less than $2 billion. The companies in these portfolios are usually on the smaller side, and are in up-and-coming industries and markets.

History of Fund/Manager

Invesco is responsible for ODIYX, and the company is based out of Kansas City, MO. The Invesco Discovery Y made its debut in June of 1994 and ODIYX has managed to accumulate roughly $2.45 billion in assets, as of the most recently available information. A team of investment professionals is the fund's current manager.

Performance

Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 6.99%, 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 20.7%, which places it in the top 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. Over the past three years, ODIYX's standard deviation comes in at 18.83%, compared to the category average of 11.9%. Looking at the past 5 years, the fund's standard deviation is 20.93% compared to the category average of 13.78%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

With a 5-year beta of 1.17, the fund is likely to be more volatile than the market average. 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. The fund has produced a negative alpha over the past 5 years of -7.18, which shows that managers in this portfolio find it difficult to pick 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 mostly on equities that are traded in the United States.

The mutual fund currently has 82.72% of its holdings in stocks, with an average market capitalization of $11.08 billion. The fund has the heaviest exposure to the following market sectors:

• Technology
• Industrial Cyclical
• Health

Turnover is 174%, which means this fund makes more trades per year than the comparable average.

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, ODIYX is a no load fund. It has an expense ratio of 0.79% compared to the category average of 0.97%. ODIYX is actually cheaper than its peers when you consider factors like cost.

Investors should also note that the minimum initial investment for the product is $1,000 and that each subsequent investment needs to be at $50.

Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.

Bottom Line

Overall, Invesco Discovery Y ( ODIYX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, worse downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

This could just be the start of your research on ODIYX in the Small Cap Growth category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.

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This article originally published on Zacks Investment Research (zacks.com).

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