Is Putnam Small Cap Growth A (PNSAX) A Strong Mutual Fund Pick Right Now?

Looking for a Small Cap Growth fund? You may want to consider Putnam Small Cap Growth A PNSAX as a possible option. PNSAX bears a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.

Objective

PNSAX is one of many different Small Cap Growth funds to choose from. Small Cap Growth mutual funds build portfolios around stocks with markets caps under $2 billion and large growth opportunities. Additionally, these portfolios typically highlight smaller companies in promising markets and industries.

History of Fund/Manager

Putnam Funds is based in Canton, MA, and is the manager of PNSAX. Putnam Small Cap Growth A made its debut in December of 1997, and since then, PNSAX has accumulated about $124.43 million in assets, per the most up-to-date date available. William J. Monroe is the fund's current manager and has held that role since March of 2017.

Performance

Investors naturally seek funds with strong performance. This fund in particular has delivered a 5-year annualized total return of 13.35%, and is in the middle third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 11.18%, which places it in the bottom 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 PNSAX over the past three years is 15.08% compared to the category average of 9.50%. Looking at the past 5 years, the fund's standard deviation is 14.54% compared to the category average of 13.82%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should always remember the downsides to a potential investment, and this segment carries some risks one should be aware of. In PNSAX's case, the fund lost 57.62% in the most recent bear market and underperformed comparable funds by 4.55%. These results could imply that the fund is a worse choice than its peers during a sliding market environment.

Investors should note that the fund has a 5-year beta of 1.22, so it is likely going to be more volatile than the market at large. Because alpha represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, one should pay attention to this metric as well. With a negative alpha of -4.85, 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, PNSAX is a load fund. It has an expense ratio of 1.21% compared to the category average of 1.34%. Looking at the fund from a cost perspective, PNSAX is actually cheaper than its peers.

This fund requires a minimum initial investment of $500, while there is no minimum for each subsequent investment.

Bottom Line

Overall, Putnam Small Cap Growth A has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, worse downside risk, and lower fees, Putnam Small Cap Growth A looks like a somewhat average choice for investors right now.

Your research on the Small Cap Growth segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer as well 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.