Is T. Rowe Price Tax-Efficient Equity (PREFX) a Strong Mutual Fund Pick Right Now?

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

Objective

We classify PREFX in the Large Cap Growth category, an area rife with potential choices. Large Cap Growth funds invest in many large U.S. companies that are expected to grow much faster compared to other large-cap stocks. To be considered large-cap, companies must have a market cap over $10 billion.

History of Fund/Manager

PREFX finds itself in the T. Rowe Price family, based out of Baltimore, MD. T. Rowe Price Tax-Efficient Equity debuted in December of 2000. Since then, PREFX has accumulated assets of about $431.81 million, according to the most recently available information. The fund's current manager, Donald J. Peters, has been in charge of the fund since December of 2000.

Performance

Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 12.34%, and it sits in the middle third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 24.65%, 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. Over the past three years, PREFX's standard deviation comes in at 14.09%, compared to the category average of 13.95%. Looking at the past 5 years, the fund's standard deviation is 18.04% compared to the category average of 15.88%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

With a 5-year beta of 1.12, 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. PREFX has generated a negative alpha over the past five years of -3.28, demonstrating 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 principally on equities that are traded in the United States.

This fund is currently holding about 78.23% in stocks, with an average market capitalization of $722.15 billion. The fund has the heaviest exposure to the following market sectors:

• Technology
• Retail Trade

With turnover at about 8%, this fund makes fewer trades than its comparable peers.

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, PREFX is a no load fund and it has an expense ratio of 0.82%.

This fund requires a minimum initial investment of $2,500, and each subsequent investment should be at least $100.

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

Bottom Line

This puts this fund from T. Rowe Price in the top 20% of all mutual funds we have a rank on right now. As a result, this is likely an excellent choice for investors seeking an option in the Large Cap Growth category.

Your research on the Large Cap Growth segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer 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.

Quantum Computing Stocks Set To Soar

Artificial intelligence has already reshaped the investment landscape, and its convergence with quantum computing could lead to the most significant wealth-building opportunities of our time.

Today, you have a chance to position your portfolio at the forefront of this technological revolution. In our urgent special report, Beyond AI: The Quantum Leap in Computing Power, you'll discover the little-known stocks we believe will win the quantum computing race and deliver massive gains to early investors.

Access the Report Free Now >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Get Your Free (PREFX): Fund Analysis Report

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

Zacks Investment Research