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Is Vanguard Energy Investor (VGENX) a Strong Mutual Fund Pick Right Now?

Zacks Equity Research
·4-min read

Having trouble finding a Sector - Energy fund? Vanguard Energy Investor (VGENX) is a potential starting point. VGENX has a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

Zacks categorizes VGENX as Sector - Energy, a segment packed with options. Sector - Energy mutual funds encompass a wide range of vastly changing and vitally important industries throughout this massive global sector. Oil and gas comprise the bulk of the exposure here, and carbon-based fuels are going to be the majority of assets in these funds. However, clean energy is starting to pick up steam.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VGENX. The Vanguard Energy Investor made its debut in May of 1984 and VGENX has managed to accumulate roughly $1.99 billion in assets, as of the most recently available information. A team of investment professionals is the fund's current manager.

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Performance

Investors naturally seek funds with strong performance. This fund in particular has delivered a 5-year annualized total return of 0.19%, 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 -1.11%, 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. VGENX's standard deviation over the past three years is 17.78% compared to the category average of 14.76%. Over the past 5 years, the standard deviation of the fund is 19.34% compared to the category average of 15.8%. 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. VGENX lost 48.46% in the most recent bear market and outperformed its peer group by 7%. These results could imply that the fund is a better choice than its peers during a sliding market environment.

Nevertheless, with a 5-year beta of 1.1, the fund is likely to be more volatile than 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. With a negative alpha of -10.34, 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, VGENX is a no load fund. It has an expense ratio of 0.33% compared to the category average of 1.55%. From a cost perspective, VGENX is actually cheaper than its peers.

Investors need to be aware that with this product, the minimum initial investment is $3,000; each subsequent investment needs to be at least $1.

Bottom Line

Overall, Vanguard Energy Investor ( VGENX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Vanguard Energy Investor ( VGENX ) looks like a good potential choice for investors right now.

For additional information on this product, or to compare it to other mutual funds in the Sector - Energy, make sure to go to www.zacks.com/funds/mutual-funds 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.


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