FRVLX
Franklin SmallCap Value-A
Introduction to Franklin SmallCap Value-A
Franklin SmallCap Value-A (FRVLX) is a mutual fund designed to provide long-term total return by investing primarily in small-capitalization companies. With a focus on value investing, the fund seeks to identify and invest in companies that are undervalued by the market but have strong potential for growth. Managed by Franklin Templeton Investments, FRVLX aims to capitalize on the growth opportunities presented by small-cap stocks, which are defined as companies with market capitalizations under $3.5 billion at the time of purchase. This fund is particularly suitable for investors looking for exposure to small-cap value stocks, offering a unique blend of growth potential and value investing principles.
At A Glance
Executive Summary
FRVLX offers small-cap value exposure with a 0.99% expense ratio and 36.24% 1-year return, focusing on undervalued stocks for growth.
Focus on small-cap value stocks; Strong 1-year return of 36.24%; Managed by Franklin Templeton Investments
Higher expense ratio at 0.99%; Negative alpha of -1.42%; High beta of 1.28 indicates volatility
Performance Analysis: A Year of Strong Returns
FRVLX has demonstrated impressive performance over the past year, with a 1-year return of 36.24%. This performance is noteworthy, especially when compared to its benchmark, the S&P 500 Total Return Index, which posted a 1-year return of 37.62%. Despite a slightly lower return than the benchmark, FRVLX’s focus on small-cap value stocks has allowed it to capture significant gains in a market environment that has favored smaller, undervalued companies. The fund’s annualized returns over longer periods, such as 10 years (8.77%) and since inception (9.41%), further highlight its ability to deliver consistent growth over time. Investors seeking robust returns in the small-cap value space may find FRVLX’s recent performance particularly appealing.
Portfolio Composition: A Diverse Small-Cap Focus
The portfolio of FRVLX is heavily weighted towards small-cap stocks, with 63.13% of its holdings in small-cap companies. This focus is complemented by a significant allocation to medium-cap stocks (13.06%) and a minimal presence in large-cap stocks. The fund’s top holdings include ACI Worldwide Inc, QinetiQ Group PLC, and Mueller Water Products Inc, each representing a small but strategic portion of the portfolio. Sector-wise, the fund is diversified across industries, with significant allocations in Industrials (27.52%) and Financials (26.91%), providing a balanced exposure to various economic sectors. This diversification helps mitigate risk while allowing the fund to capitalize on growth opportunities across different market segments.
Risk Metrics: Understanding Volatility and Drawdowns
Investors should be aware of the risk metrics associated with FRVLX, which indicate a higher level of volatility compared to the benchmark. The fund’s beta of 1.28 suggests that it is more volatile than the market, which could lead to larger price swings. Additionally, the fund has a negative alpha of -1.42%, indicating that it has underperformed its benchmark on a risk-adjusted basis. The Sharpe Ratio of -0.07 and Treynor Ratio of -1.11 further highlight the challenges in achieving risk-adjusted returns. The fund experienced a maximum drawdown of -9.8%, with a quick recovery period of two months, demonstrating its resilience in adverse market conditions. These metrics are crucial for investors to consider, especially those with a lower risk tolerance.
Expense Ratio: A Consideration for Cost-Conscious Investors
FRVLX has an expense ratio of 0.99%, which is relatively high compared to some of its peers in the small-cap value category. While this expense ratio reflects the costs associated with managing a diversified portfolio of small-cap stocks, investors should weigh these costs against the fund’s performance and potential returns. The expense ratio is an important factor for cost-conscious investors, as it directly impacts the net returns of the fund. When compared to similar funds like Allspring Discovery SmallCap Growth-A (EGWAX) and Oberweis SmallCap Opportunities (OBSOX), which have lower expense ratios, FRVLX’s higher costs may be a consideration for those looking to maximize their investment efficiency.
Comparative Analysis: How FRVLX Stacks Up Against Peers
When comparing FRVLX to similar funds, such as Allspring Discovery SmallCap Growth-A (EGWAX) and Delaware Ivy SmallCap Growth-A (WSGAX), it is important to consider both performance and cost. While FRVLX has delivered a strong 1-year return of 36.24%, it slightly lags behind EGWAX’s 39.28% return. However, FRVLX’s focus on value stocks differentiates it from its growth-oriented peers, offering a unique investment approach. The fund’s higher expense ratio of 0.99% is a trade-off for its value-focused strategy, which may appeal to investors seeking exposure to undervalued small-cap stocks. This comparative analysis helps investors understand the nuances of FRVLX’s positioning within the small-cap value space.
Investor Suitability: Who Should Consider FRVLX?
FRVLX is best suited for investors who are comfortable with the inherent volatility of small-cap stocks and are seeking long-term growth through value investing. The fund’s focus on small-cap value stocks makes it an attractive option for those looking to diversify their portfolios with exposure to smaller, potentially undervalued companies. However, the higher expense ratio and risk metrics suggest that this fund may be more appropriate for investors with a higher risk tolerance and a long-term investment horizon. Those who are willing to accept short-term volatility in exchange for the potential of higher returns may find FRVLX to be a suitable addition to their investment strategy.
Conclusion: The Unique Appeal of Franklin SmallCap Value-A
In conclusion, Franklin SmallCap Value-A (FRVLX) offers a compelling investment opportunity for those interested in small-cap value stocks. With a strong 1-year return of 36.24% and a diversified portfolio across various sectors, the fund provides exposure to undervalued companies with growth potential. While the higher expense ratio and volatility may be a concern for some investors, the fund’s focus on value investing and its ability to recover quickly from drawdowns make it a noteworthy option for risk-tolerant investors. FRVLX stands out for its strategic approach to small-cap investing, making it a valuable consideration for those looking to enhance their portfolio with a focus on long-term growth.
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Futher Reading
https://finance.yahoo.com/quote/FRVLX/”>Yahoo: Franklin SmallCap Value-A
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