OTCFX
TRPrice SmallCap Stock-Inv
Introduction to TRPrice SmallCap Stock-Inv
The TRPrice SmallCap Stock-Inv fund, ticker symbol OTCFX, is a small-cap growth mutual fund managed by T. Rowe Price. It aims to provide long-term capital growth by investing in stocks of small companies, defined as those with market capitalizations within or below the range of the Russell 2000 Index or S&P Small-Cap 600 Index. With an expense ratio of 0.90%, this fund is designed for investors seeking aggressive growth opportunities in the small-cap sector. The fund’s strategy focuses on identifying companies with strong growth potential, making it an attractive option for those looking to capitalize on the dynamic nature of small-cap stocks.
At A Glance
Executive Summary
OTCFX offers small-cap growth with a 0.90% expense ratio, outperforming peers with a 36.72% 1-year return. Ideal for aggressive growth investors.
Potential for high returns with 36.72% 1-year performance.\nDiverse sector allocation with strong healthcare and industrials presence.\nManaged by T. Rowe Price, a reputable fund family.
Higher risk with a beta of 1.16 and negative alpha.\nLow yield of 0.19% may not suit income-focused investors.\nRecent underperformance in 3-year returns at -0.30%.
Performance Highlights: A Year of Growth
OTCFX has demonstrated impressive performance over the past year, with a 1-year return of 36.72%, significantly outperforming its benchmark, the S&P 500 Total Return Index. This strong performance is indicative of the fund’s ability to capitalize on the growth potential of small-cap stocks. However, it’s important to note that the fund’s 3-year annualized return is -0.30%, suggesting some volatility in its performance. Despite this, the fund’s 5-year and 10-year returns remain robust at 9.97% and 10.45%, respectively, highlighting its potential for long-term growth. Investors should consider these performance metrics when evaluating the fund’s suitability for their portfolios.
Sector Allocation: A Diverse Portfolio
The TRPrice SmallCap Stock-Inv fund boasts a diverse sector allocation, with significant investments in healthcare (19.10%), industrials (17.74%), and financials (17.37%). This diversification helps mitigate risk by spreading investments across various sectors, each with its own growth dynamics. The fund’s allocation to technology (15.01%) and energy (6.05%) further enhances its growth potential, as these sectors are often at the forefront of innovation and economic expansion. By maintaining a balanced exposure to different industries, OTCFX aims to capture growth opportunities while managing sector-specific risks, making it a compelling choice for investors seeking a well-rounded small-cap growth fund.
Risk Metrics: Understanding the Volatility
Investors should be aware of the risk metrics associated with OTCFX, as they provide insight into the fund’s volatility and potential for returns. The fund has a beta of 1.16, indicating higher volatility compared to the market. Its alpha is -0.94%, suggesting that the fund has underperformed its benchmark on a risk-adjusted basis. The Sharpe ratio of -0.05 further highlights the fund’s risk-return profile, indicating that the returns may not adequately compensate for the risk taken. Despite these metrics, the fund’s standard deviation of 5.03% and downside risk of 3.21% suggest a moderate level of risk, which may appeal to investors with a higher risk tolerance.
Competitive Comparison: Standing Out Among Peers
When compared to similar funds, OTCFX holds its ground with a competitive 1-year return of 36.72%. While funds like Allspring Discovery SmallCap Growth-A (EGWAX) have slightly higher returns at 39.28%, OTCFX’s performance is commendable given its lower expense ratio of 0.90%. Other peers, such as Optimum Small/MidCapGrowth-Inst (OISGX) and AmerBeacon Stephens SmallCap Growth-Inv (STSGX), offer similar returns but with higher expense ratios. This positions OTCFX as a cost-effective option for investors seeking exposure to small-cap growth stocks. The fund’s ability to deliver strong returns while maintaining a competitive expense structure makes it an attractive choice for cost-conscious investors.
Top Holdings: Key Contributors to Growth
The top holdings of OTCFX play a crucial role in driving the fund’s performance. Notable investments include Cboe Global Markets Inc (1.27%), PAR Technology Corp (1.19%), and Liberty Live Group Ordinary Shares Series C (1.11%). These companies represent a mix of industries, contributing to the fund’s diversified growth strategy. The presence of Lattice Semiconductor Corp (1.04%) and SiteOne Landscape Supply Inc (1.02%) further underscores the fund’s focus on companies with strong growth potential. By investing in a variety of small-cap stocks, OTCFX aims to capture the upside potential of emerging companies, making it a suitable option for investors looking to benefit from the growth of small-cap equities.
Market Cap Allocation: Focus on Small Companies
OTCFX’s market cap allocation is heavily weighted towards small companies, with 58.37% of its assets invested in small-cap stocks. This focus aligns with the fund’s objective of capitalizing on the growth potential of smaller companies, which often have more room for expansion compared to their larger counterparts. The fund also maintains a modest allocation to medium-cap stocks (15.39%) and a minimal exposure to large-cap stocks (0.27%). This strategic allocation allows the fund to benefit from the agility and innovation of small-cap companies while providing some stability through medium-cap investments. Investors seeking to tap into the growth potential of small-cap stocks will find OTCFX’s market cap allocation particularly appealing.
Conclusion: Is OTCFX Right for You?
In conclusion, the TRPrice SmallCap Stock-Inv fund offers a compelling opportunity for investors seeking exposure to small-cap growth stocks. With a strong 1-year return of 36.72% and a competitive expense ratio of 0.90%, the fund stands out among its peers. However, potential investors should be mindful of the fund’s higher volatility, as indicated by its beta of 1.16 and negative alpha. The fund’s diverse sector allocation and focus on small-cap companies make it an attractive option for those with a higher risk tolerance and a long-term investment horizon. Ultimately, OTCFX is best suited for aggressive investors looking to capitalize on the growth potential of small-cap stocks.
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Futher Reading
https://finance.yahoo.com/quote/OTCFX/”>Yahoo: TRPrice SmallCap Stock-Inv
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