Is American Century Utilities Inv (BULIX) A Strong Mutual Fund Pick Right Now?

If you're looking for a Sector - Utilities fund category, then a potential option is American Century Utilities Inv BULIX. BULIX carries a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.

Objective

Zacks categorizes BULIX is Sector - Utilities, which is a segment packed with options. Known for its stability, the utility industry is perfect for investors seeking low risk. Sector - Utilities mutual funds focus on companies that provide essential services to millions of people on a daily basis: think electric power, gas distribution, and water supply.

History of Fund/Manager

American Century is based in Kansas City, MO, and is the manager of BULIX. The American Century Utilities Inv made its debut in March of 1993 and BULIX has managed to accumulate roughly $511.79 million in assets, as of the most recently available information. The fund's current manager, Yulin Long, has been in charge of the fund since December of 2010.

Performance

Of course, investors look for strong performance in funds. BULIX has a 5-year annualized total return of 10.18% and it sits 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 6.54%, 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. The standard deviation of BULIX over the past three years is 10.23% compared to the category average of 10.67%. Over the past 5 years, the standard deviation of the fund is 11.06% compared to the category average of 10.99%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

One cannot ignore the volatility of this segment, however, as it is always important for investors to remember the downside to any potential investment. In the most recent bear market, BULIX lost 41.13% and outperformed its peer group by 2.24%. This means that the fund could possibly be a better choice than its peers during a down market environment.

And for investors concerned about the potential drawdown in a really bad calendar year, we can look back to 2008 for that figure. In its worst calendar year in a decade, the fund lost over 31.12%.

Nevertheless, with a 5-year beta of 0.48, the fund 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. The fund has produced a positive alpha over the past 5 years of 3.28, which shows that managers in this portfolio are skilled in picking 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 99.17% of its holdings in stocks, and these companies have an average market capitalization of $59.18 billion. The fund has the heaviest exposure to the following market sectors:

1. Utilities
2. Technology

With turnover at about 39%, this fund is making fewer trades than comparable funds.

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, BULIX is a no load fund. It has an expense ratio of 0.67% compared to the category average of 1.25%. From a cost perspective, BULIX is actually cheaper than its peers.

This fund requires a minimum initial investment of $2,500, and each subsequent investment should be at least $50.

Bottom Line

Overall, American Century Utilities Inv BULIX has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a somewhat average choice for investors right now.

For additional information on this product, or to compare it to other mutual funds in the Sector - Utilities, 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.