Mutual Funds Spotlight – T. Rowe Price Capital Appreciation Fund

by Cynthia Wilson | May 16, 2011 9:25 am

The T. Rowe Price Capital Appreciation Fund (MUTF: PRWCX[1]) is one of the large-cap mutual funds that gets Morningstar’s highest rating of five stars, and is a fund that appeals to many 401k investors.

T. Rowe Price Capital Appreciation Fund focuses primarily on established companies with above average growth potential. At least half of the fund’s assets are put into U.S. common stocks and the remaining assets in corporate and government bonds, foreign securities, futures, options and convertible stocks and bonds.  The fund is a good option for long-term growth and income seeking investors who can withstand some market volatility.

Here are the specifics for the T. Rowe Price Capital Appreciation Fund for today’s mutual fund spotlight:

Investing Strategy: A minimum of 50% of the fund’s cash is invested in common stock, and currently the percentage stands at about 65%. Currently, cash accounts for nearly 15% of the fund’s assets and bonds are just over 13% of the portfolio.

Expense Ratio: At a 0.76% expense ratio, T. Rowe Price Capital Appreciation Fund is on the cheap side compared to similar funds, even with a $75 transaction fee. Most similar capital appreciation funds charge well north of 1%, plus a $75 transaction fee or a heavier front-end load.

Top 5 Holdings: As mentioned, a significant portion of T. Rowe Capital Price Appreciation Fund — 15% of the fund’s current holdings — is in cash. That’s nearly five times as much as its largest stock holding, food conglomerate PepsiCo, Inc. (NYSE: PEP[2]) at 3.3%. Other top stock holdings include  industrial technologies leader Danaher Corporation (NYSE: DHR[3]) at 3.3%, pharmaceutical giant Pfizer Inc. (NYSE: PFE[4]) at 3.2%, Thermo Fisher Scientific, Inc. (NYSE: TMO[5]) at 3.1%, and financial giant U.S. Bancorp. (NYSE: USB[6]) at 2.9%.

Returns: The fund’s 14% return over the last 12 months underperformed the broader market’s 18% performance over the same period.  Its five-year return of 3% is slightly below the S&P 500’s 3.6% 5-year return, but is nearly 3 times less than the 11.7% return for the Dow Jones Industrial Average.

Other Fund Statistics

  1. PRWCX:
  2. PEP:
  3. DHR:
  4. PFE:
  5. TMO:
  6. USB:

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