Is MFS Technology Fund A (MTCAX) A Strong Mutual Fund Pick Right Now?
Zacks Investment Research | Dec 18, 2018 07:00AM ET
Any investors hoping to find a Sector - Tech fund could think about starting with MFS Technology Fund A (MTCAX). MTCAX possesses a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
We note that MTCAX is a Sector - Tech option, and this area is loaded with many options. Found in a wide number of industries such as semiconductors, software, internet, and networking, tech companies are everywhere. Thus, Sector - Tech mutual funds that invest in technology let investors own a stake in a notoriously volatile sector, but with a much more diversifies approach.
History of Fund/Manager
MFS is responsible for MTCAX, and the company is based out of Boston, MA. MFS Technology Fund A debuted in January of 1997. Since then, MTCAX has accumulated assets of about $430.72 million, according to the most recently available information. The fund is currently managed by Matthew D. Sabel who has been in charge of the fund since May of 2011.
Performance
Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 16.05%, and is in the top 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 17.64%, which places it in the top third during this time-frame.
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, MTCAX's standard deviation comes in at 14.57%, compared to the category average of 9.27%. Looking at the past 5 years, the fund's standard deviation is 14.08% compared to the category average of 9.39%. This makes the fund more volatile than its peers over the past half-decade.
Risk Factors
Investors cannot discount the risks to this segment though, as it is always important to remember the downside for any potential investment. MTCAX lost 55.66% in the most recent bear market and underperformed its peer group by 2.35%. This might suggest that the fund is a worse choice than its peers during a bear market.
Nevertheless, investors should also note that the fund has a 5-year beta of 1.16, which means it is hypothetically more volatile than the market at large. 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. With a positive alpha of 3.28, managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.
Holdings
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Exploring 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 largely on equities that are traded in the United States.
This fund is currently holding about 95.43% stock in stocks, which have an average market capitalization of $330.03 billion. Turnover is about 30%, so those in charge of the fund make fewer trades than the average comparable fund.
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, MTCAX is a load fund. It has an expense ratio of 1.22% compared to the category average of 1.35%. From a cost perspective, MTCAX is actually cheaper than its peers.
This fund requires a minimum initial investment of $1,000, and each subsequent investment should be at least $50.
Bottom Line
Overall, MFS Technology Fund A ( MTCAX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, MFS Technology Fund A ( MTCAX ) looks like a good potential choice for investors right now.
This could just be the start of your research on MTCAXin the Sector - Tech category. Consider going to Original post
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