Having trouble finding a Small Cap Growth fund? T. Rowe Price New Horizons (PRNHX) is a potential starting point. PRNHX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.
Objective
PRNHX is part of the Small Cap Growth category, and this segment boasts an array of many other possible options. Small Cap Growth mutual funds usually focus their portfolios on stocks with large growth opportunities and a market cap of under $2 billion. These portfolios tend to feature small companies in up-and-coming industries and markets.
History of Fund/Manager
T. Rowe Price is based in Baltimore, MD, and is the manager of PRNHX. Since T. Rowe Price New Horizons made its debut in June of 1960, PRNHX has garnered more than $10.38 billion in assets. The fund is currently managed by Joshua Spencer who has been in charge of the fund since March of 2019.
Performance
Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 6.91%, and is in the bottom 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 -8.73%, 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. Over the past three years, PRNHX’s standard deviation comes in at 22.34%, compared to the category average of 16.89%. Over the past 5 years, the standard deviation of the fund is 22.74% compared to the category average of 17.65%. This makes the fund more volatile than its peers over the past half-decade.
Risk Factors
Investors should not forget about beta, an important way to measure a mutual fund’s risk compared to the market as a whole. PRNHX has a 5-year beta of 1, which means it is likely to be as volatile as the market average. Alpha is an additional metric to take into consideration, since it represents a portfolio’s performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. PRNHX has generated a negative alpha over the past five years of -6.25, demonstrating that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
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, PRNHX is a no load fund. It has an expense ratio of 0.78% compared to the category average of 0.98%. From a cost perspective, PRNHX is actually cheaper than its peers.
While the minimum initial investment for the product is $2,500, investors should also note that each subsequent investment needs to be at least $100.
Fees charged by investment advisors have not been taken into considiration. Returns would be less if those were included.
Bottom Line
Overall, even with its comparatively weak performance, worse downside risk, and lower fees, T. Rowe Price New Horizons ( PRNHX ) has a high Zacks Mutual Fund rank, and therefore looks a great potential choice for investors right now.
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