Back to top

Image: Bigstock

Is Vanguard Health Care Index Admiral (VHCIX) a Strong Mutual Fund Pick Right Now?

Read MoreHide Full Article

If you've been stuck searching for Sector - Health funds, consider Vanguard Health Care Index Admiral (VHCIX - Free Report) as a possibility. VHCIX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

Zacks categorizes VHCIX as Sector - Health, a segment packed with options. Sector - Health mutual funds offer investors a focus on the healthcare industry, one of the largest sectors in the American economy. These funds can include everything from pharmaceutical companies to medical device manufacturers and for-profit hospitals.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VHCIX. Since Vanguard Health Care Index Admiral made its debut in January of 2004, VHCIX has garnered more than $1.33 billion in assets. Walter Nejman is the fund's current manager and has held that role since December of 2015.

Performance

Investors naturally seek funds with strong performance. This fund in particular has delivered a 5-year annualized total return of 11.97%, and is in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 13.65%, 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 VHCIX over the past three years is 13.51% compared to the category average of 18.24%. Looking at the past 5 years, the fund's standard deviation is 13.91% compared to the category average of 17.57%. This makes the fund less 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 VHCIX's case, the fund lost 34.74% in the most recent bear market and underperformed its peer group by 1.5%. This makes the fund a possibly worse choice than its peers during a sliding market environment.

Even still, the fund has a 5-year beta of 1.03, so investors should note that it is hypothetically as volatile as the market at large. Another factor to consider is alpha, as it reflects a portfolio's performance on a risk-adjusted basis relative to a benchmark-in this case, the S&P 500. VHCIX's 5-year performance has produced a positive alpha of 0.97, which means managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

Holdings

Investigating 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 principally on equities that are traded in the United States.

Right now, 83.16% of this mutual fund's holdings are stocks, and these companies have an average market capitalization of $112.16 billion. The fund has the heaviest exposure to the following market sectors:

  1. Health
  2. Finance
This fund's turnover is about 6%, so the fund managers are making fewer trades than the average comparable fund.

Expenses

For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, VHCIX is a no load fund. It has an expense ratio of 0.10% compared to the category average of 1.29%. VHCIX is actually cheaper than its peers when you consider factors like cost.

Investors should also note that the minimum initial investment for the product is $100,000 and that each subsequent investment needs to be at $1.

Bottom Line

Overall, Vanguard Health Care Index Admiral ( VHCIX ) has a high Zacks Mutual Fund rank, strong performance, average downside risk, and lower fees compared to its peers.

Don't stop here for your research on Sector - Health funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare VHCIX to its peers as well for additional information. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Vanguard Health Care Index Adm (VHCIX) - free report >>

Published in