Yahoo Finance 3 Large-Cap Value Funds to Buy on Falling Consumer Sentiment
Inflation started showing signs of cooling in April and May, but concerns over a slowing economy are far from over. This has seen consumer sentiment taking a massive hit over the past few months.
The University of Michigan’s preliminary reading on the overall index of consumer sentiment came in at 65.6 in June, declining from May’s final reading of 69.1. This is the lowest level seen in the past seven months. Also, June’s reading was sharply lower than economists’ forecast of a preliminary reading of 72.
Consumer sentiment is hitting rock bottom on growing concerns over inflation, which remains sharply higher than the Federal Reserve’s 2% target despite showing signs of cooling. Consumers are worried that if inflation doesn’t decline at a sharper pace, the economy may slip into a recession.
Although the consumer's expectation index for inflation for the next one-year period remained unchanged at 3.3% in June, the outlook for inflation over the next five years rose to 3.1% in June from 3% in May.
The consumer price index (CPI) remained unchanged in May after rising 0.3% in April. Year over year, CPI rose 3.3% in May, which was slightly below the consensus estimate of a rise of 3.4%.
Core CPI, which excludes the volatile food and energy prices, inched up 0.2% sequentially and 3.4% from the year-ago levels, both of which came in below analysts’ expectations of a rise of 0.3% and 3.5%, respectively.
High inflation has made the Federal Reserve revise its rate cut plans. The Fed said last week that it now sees just one rate cut of 25 basis points this year, down from the three projected in its March FOMC meeting.
A delay in rate cut means higher interest rates for a longer period, which could make markets volatile.
Given this situation, a savvy investor might choose to invest in large-cap value funds to effectively mitigate risks. Historically, large-cap funds have shown stability and are often considered more reliable than mid- or small-cap funds.
Also, value funds, which consist of stocks typically priced below fundamental metrics, such as earnings, book value, and debt-to-equity ratios, and provide dividend payments, present an attractive option for investors seeking profitable opportunities.
3 Best Choices
We've identified three large-cap value mutual funds that have demonstrated impressive annualized returns over 3-year and 5-year periods. These funds also hold a Zacks Mutual Fund Rank of #1 (Strong Buy), require an initial investment of no more than $5,000 and have a low expense ratio.
The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Federated Hermes MDT Large Cap Value Svc FSTKX fund's investment objective is to provide growth of income and capital. FSTKX pursues its investment objective by investing primarily in equity securities of companies that are generally leaders in their industries, are characterized by sound management and have the ability to finance expected growth.
FSTKX’s 3-year and 5-year annualized returns are 9.2% and 13.2%, respectively. Federated Hermes MDT Large Cap Value Svc fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.20%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
T. Rowe Price Value TRVLX fund seeks long-term capital appreciation. TRVLX invests at least 65% of total assets in common stocks that the portfolio manager regards as undervalued. T. Rowe Price Value fund’s stock holdings consist primarily of large-company issues, but also include smaller companies.
TRVLX’s 3-year and 5-year annualized returns are 6.2% and 12.8%, respectively. T. Rowe Price Value fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.71%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Northern Income Equity NOIEX fund seeks to provide a high level of current income with long-term capital appreciation as a secondary objective. NOIEX’s approach is to identify the securities of companies that generate high current yields and offer prospects for growth and possible capital appreciation. In pursuing its objective, the Northern Income Equity fund invests at least 65% of its total assets in a mix of income-producing equity securities, with no limit on the fund's ability to invest in non-investment grade fixed income and convertible debt securities.
NOIEX’s 3-year and 5-year annualized returns are 9.3% and 13.9%, respectively. Northern Income Equity fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.49%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
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