Is Parnassus Mid-Cap Investor (PARMX) a Strong Mutual Fund Pick Right Now?

Having trouble finding a Mid Cap Growth fund? Parnassus Mid-Cap Investor (PARMX) is a potential starting point. PARMX bears a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

Zacks categorizes PARMX as Mid Cap Growth, a segment packed with options. Mid Cap Growth mutual funds aim to target companies with a market capitalization between $2 billion and $10 billion that are also expected to exhibit more extensive growth opportunities for investors than their peers. A firm is typically considered to be a growth stock if it consistently posts impressive sales and/or earnings growth.

History of Fund/Manager

PARMX is a part of the Parnassus family of funds, a company based out of San Francisco, CA. The Parnassus Mid-Cap Investor made its debut in April of 2005 and PARMX has managed to accumulate roughly $1.15 billion in assets, as of the most recently available information. The fund's current manager, Lori A. Keith, has been in charge of the fund since October of 2008.

Performance

Investors naturally seek funds with strong performance. This fund in particular has delivered a 5-year annualized total return of 5.53%, and it sits 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 14.43%, 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, PARMX's standard deviation comes in at 15.58%, compared to the category average of 13.26%. Over the past 5 years, the standard deviation of the fund is 17.13% compared to the category average of 15.16%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should note that the fund has a 5-year beta of 0.98, which means it is hypothetically as volatile as 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. The fund has produced a negative alpha over the past 5 years of -6.63, which shows that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Expenses

For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, PARMX is a no load fund. It has an expense ratio of 0.95% compared to the category average of 0.92%. PARMX is actually more expensive than its peers when you consider factors like cost.

Investors need to be aware that with this product, the minimum initial investment is $2,000; each subsequent investment needs to be at least $50.

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

Bottom Line

Overall, even with its comparatively weak performance, average downside risk, and higher fees, Parnassus Mid-Cap Investor ( PARMX ) has a high Zacks Mutual Fund rank, and therefore looks a good potential choice for investors right now.

For additional information on this product, or to compare it to other mutual funds in the Mid Cap Growth, make sure to go to www.zacks.com/funds/mutual-funds for additional information. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.

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