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3 Healthcare Mutual Funds to Buy as the Sector Continues to Grow
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A late-year rally in 2023 saw the healthcare sector pair its losses for the year and end the 12 months on a positive note, even if only just. The turnaround, however, did not stop it from becoming one of the S&P 500’s worst-performing sectors in 2023, rising just 0.3% compared to the benchmark index’s 24% jump.
A lot is going for the sector currently. Health spending in the United States has been forecast to grow at an average annual rate of 5.4% for 2019-2028 and should reach $6.2 trillion by 2028. While the industry faces labor shortages and recessionary pressures in the post-pandemic world marked by a European war, it is currently pitted to grow at a higher rate than the overall economy.
Market participants are currently betting on healthcare to emerge as one of the winners for 2024. For starters, while the sector’s first tryst with the government over negotiations around the Inflation Reduction Act was marred by ongoing legal challenges, recent statements from both sides show signs of reaching a consensus sometime soon. Also, regular demand for healthcare services is not dependent on the peaks and troughs of a market that has risen and fallen over the past two years over the Fed’s monetary policy.
The sector also seems lucrative for investors looking for a steady cash flow because pharmaceutical companies are known to offer regular dividends.
Healthcare has also seen growth in the ETF market in 2024. The S&P 500 Select Sector SPDR for Healthcare (XLV) grew 3% in January. This was after a blockbuster December and a 12-month growth of 7.1%. The sector may be off its pandemic-period peak but will remain resilient and continue to grow in the coming years.
Hence, astute investors should bet on healthcare mutual funds at present. Mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
We have thus selected three such healthcare mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy), 2 (Buy), have positive three-year and five-year annualized returns, minimum initial investments within $5000, and carry a low expense ratio.
Janus Henderson Global Life Sciences (JFNAX - Free Report) primarily invests in equity securities issued by companies engaged in life sciences orientation.
Andrew Acker has been the lead manager of JFNAXsince April 2007. The fund has 6.1% of its portfolio invested in UnitedHealth Group, 4.2% in AstraZeneca and 3.7% in Eli Lilly.
JFNAX’s 3-year and 5-year annualized returns are 4.8% and 11.1%, respectively. Its net expense ratio is 0.98% compared to the category average of 0.99%. JFNAXhas a Zacks Mutual Fund Rank #2. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Vanguard Health Care (VGHCX - Free Report) primarily invests in stocks of companies principally engaged in the development, production, or distribution of products and services in the healthcare industry. VGHCX also invests a significant portion of its assets in foreign stocks.
Jean M. Hynes has been the lead manager of VGHCX since May 2008. The fund has 8% of its portfolio invested in Eli Lilly, 7.8% in UnitedHealth Group and 5.7% in AstraZeneca.
VGHCX’s 3-year and 5-year annualized returns are 5.8% and 9.2%, respectively. Its net expense ratio is 0.36% compared to the category average of 1.04%. VGHCX has a Zacks Mutual Fund Rank #1.
Fidelity Select Pharmaceuticals Portfolio (FPHAX - Free Report) primarily invests in stocks of companies principally engaged in the research, development, manufacture, sale, or distribution of pharmaceuticals and drugs of all types. FPHAX advisors use fundamental analysis of factors like each issuer's financial condition and industry position, as well as market and economic conditions, to arrive at their investment decision.
Karim Suwwan de Felipe has been the lead manager of FPHAX since June 2017. The fund has 24.1% of its portfolio invested in Eli Lilly, 14.8% in Novo Nordisk and 9.4% in AstraZeneca.
FPHAX’s 3-year and 5-year annualized returns are 8.6% and 12.9%, respectively. Its net expense ratio is 0.73% compared to the category average of 1.12%. FPHAX has a Zacks Mutual Fund Rank #1.
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3 Healthcare Mutual Funds to Buy as the Sector Continues to Grow
A late-year rally in 2023 saw the healthcare sector pair its losses for the year and end the 12 months on a positive note, even if only just. The turnaround, however, did not stop it from becoming one of the S&P 500’s worst-performing sectors in 2023, rising just 0.3% compared to the benchmark index’s 24% jump.
A lot is going for the sector currently. Health spending in the United States has been forecast to grow at an average annual rate of 5.4% for 2019-2028 and should reach $6.2 trillion by 2028. While the industry faces labor shortages and recessionary pressures in the post-pandemic world marked by a European war, it is currently pitted to grow at a higher rate than the overall economy.
Market participants are currently betting on healthcare to emerge as one of the winners for 2024. For starters, while the sector’s first tryst with the government over negotiations around the Inflation Reduction Act was marred by ongoing legal challenges, recent statements from both sides show signs of reaching a consensus sometime soon. Also, regular demand for healthcare services is not dependent on the peaks and troughs of a market that has risen and fallen over the past two years over the Fed’s monetary policy.
The sector also seems lucrative for investors looking for a steady cash flow because pharmaceutical companies are known to offer regular dividends.
Healthcare has also seen growth in the ETF market in 2024. The S&P 500 Select Sector SPDR for Healthcare (XLV) grew 3% in January. This was after a blockbuster December and a 12-month growth of 7.1%. The sector may be off its pandemic-period peak but will remain resilient and continue to grow in the coming years.
Hence, astute investors should bet on healthcare mutual funds at present. Mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
We have thus selected three such healthcare mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy), 2 (Buy), have positive three-year and five-year annualized returns, minimum initial investments within $5000, and carry a low expense ratio.
Janus Henderson Global Life Sciences (JFNAX - Free Report) primarily invests in equity securities issued by companies engaged in life sciences orientation.
Andrew Acker has been the lead manager of JFNAXsince April 2007. The fund has 6.1% of its portfolio invested in UnitedHealth Group, 4.2% in AstraZeneca and 3.7% in Eli Lilly.
JFNAX’s 3-year and 5-year annualized returns are 4.8% and 11.1%, respectively. Its net expense ratio is 0.98% compared to the category average of 0.99%. JFNAXhas a Zacks Mutual Fund Rank #2. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Vanguard Health Care (VGHCX - Free Report) primarily invests in stocks of companies principally engaged in the development, production, or distribution of products and services in the healthcare industry. VGHCX also invests a significant portion of its assets in foreign stocks.
Jean M. Hynes has been the lead manager of VGHCX since May 2008. The fund has 8% of its portfolio invested in Eli Lilly, 7.8% in UnitedHealth Group and 5.7% in AstraZeneca.
VGHCX’s 3-year and 5-year annualized returns are 5.8% and 9.2%, respectively. Its net expense ratio is 0.36% compared to the category average of 1.04%. VGHCX has a Zacks Mutual Fund Rank #1.
Fidelity Select Pharmaceuticals Portfolio (FPHAX - Free Report) primarily invests in stocks of companies principally engaged in the research, development, manufacture, sale, or distribution of pharmaceuticals and drugs of all types. FPHAX advisors use fundamental analysis of factors like each issuer's financial condition and industry position, as well as market and economic conditions, to arrive at their investment decision.
Karim Suwwan de Felipe has been the lead manager of FPHAX since June 2017. The fund has 24.1% of its portfolio invested in Eli Lilly, 14.8% in Novo Nordisk and 9.4% in AstraZeneca.
FPHAX’s 3-year and 5-year annualized returns are 8.6% and 12.9%, respectively. Its net expense ratio is 0.73% compared to the category average of 1.12%. FPHAX has a Zacks Mutual Fund Rank #1.