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Is Oakmark Equity and Income Investor (OAKBX) a Strong Mutual Fund Pick Right Now?

If investors are looking at the Allocation Balanced fund category, make sure to pass over Oakmark Equity and Income Investor (OAKBX). OAKBX carries a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

The world of Zacks' Allocation Balanced funds is an area filled with options, such as OAKBX. These funds like to invest in a variety of asset types, finding a balance between stocks, bonds, cash, and sometimes even precious metals and commodities; they are mostly categorized by their respective asset allocation. For investors, Allocation Balanced funds can provide an entry point into diversified mutual funds, and present core holding options for a portfolio of funds.

History of Fund/Manager

Oakmark is responsible for OAKBX, and the company is based out of Kansas City, MO. Since Oakmark Equity and Income Investor made its debut in November of 1995, OAKBX has garnered more than $9.15 billion in assets. The fund is currently managed by a team of investment professionals.

Performance

Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 5.38%, and is in the middle third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 7.48%, 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. Compared to the category average of 9.11%, the standard deviation of OAKBX over the past three years is 9.84%. The standard deviation of the fund over the past 5 years is 9.32% compared to the category average of 9.28%. 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. In OAKBX's case, the fund lost 24.79% in the most recent bear market and outperformed its peer group by 11%. This means that the fund could possibly be a better choice than its peers during a down market environment.

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. OAKBX has a 5-year beta of 0.74, which means it is likely to be less 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. OAKBX has generated a negative alpha over the past five years of -2.66, demonstrating that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Holdings

Examining 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 mostly on equities that are traded in the United States.

The mutual fund currently has 85.88% of its holdings in stocks, with an average market capitalization of $128.41 billion. The fund has the heaviest exposure to the following market sectors:

  1. Other
  2. Finance

With turnover at about 10%, this fund is making fewer trades than comparable funds.

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, OAKBX is a no load fund. It has an expense ratio of 0.83% compared to the category average of 0.92%. OAKBX is actually cheaper than its peers when you consider factors like cost.

While the minimum initial investment for the product is $1,000, investors should also note that there is no minimum for each subsequent investment.

Bottom Line

Overall, Oakmark Equity and Income Investor ( OAKBX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, this fund looks like a somewhat weak choice for investors right now.

For additional information on the Allocation Balanced area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into OAKBX too for additional information. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.


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