The healthcare space saw a fair share of ebbs and flows last year. While the pandemic drove major pharmaceuticals to find a suitable cure and a vaccine to stop the spread of the virus, several outpatient services and clinics had to keep doors shut under the lockdown guidelines. Lower patient volume and higher expenses tied to the COVID-19 pandemic have created financial challenges for several hospitals. In fact, hospitals experienced increases in certain expenses, including those related to drugs, supplies and labor.

Hence, a complete recovery of patient volume, vaccine progress and a sustained decline in COVID-19 cases could help hospitals bring back profit margin and also open doors for outpatient and other services. In recent months, vaccine rollout has boosted the healthcare sector, driving demand for companies engaged in vaccine development, packaging and logistics.

On Mar 11, President Joe Biden signed a $1.9 trillion COVID-19 relief package into law. The package injects nearly $20 billion into COVIID-19 vaccination programs. It will provide money to ramp up the vaccination rollout process among the masses and aid in the efforts to keep track of new strains of coronavirus. Additionally, Biden has directed state governments to make all adults eligible for the vaccine no later than May 1.

U.S. officials also plan to use data gathered from vaccinated people and ongoing clinical trials to determine when and whether the current COVID-19 vaccines need to be updated to address the viral variants. In the first week of March, the FDA granted an emergency use authorization to Johnson & Johnson's Janssen COVID-19 vaccine, adding a third vaccine maker to the U.S. arsenal to fight the pandemic, after Moderna and Pfizer.

As a bonus, the vaccine developed by Johnson & Johnson in partnership with Janssen Pharmaceuticals will have 20 million doses available by the end of March. This could be sufficient to fully vaccinate 20 million people as Johnson & Johnson’s vaccine is a single dose, while those of Pfizer-BioNTech and Moderna’s are administered in two doses each, three to four weeks apart. At the logistical end, Johnson & Johnson’s vaccine does not require freezer storage and thus can be distributed easily in remote rural areas and underserviced communities with limited access to health-care and storage facilities.

Additionally, Eli Lilly reported on Mar 10 that the combination antibody therapy, which is used to fight COVID-19 in infected patients can reduce the risk of hospitalization and death by 87%. Eli Lilly’s combination therapy study of two antibodies, bamlanivimab and etesevimab, was conducted on more than 750 high-risk coronavirus patients.

Even if we ignore the pandemic-driven rally in the healthcare space, the space is benefiting from evolution in technology, from telehealth to robotics and advancement in telehealth. Additionally, tie-ups, partnerships, mergers, consolidations and IPOs will make the healthcare sector a hot preference for investors this year.

4 Healthcare Fund Picks

Millions of vaccines are being developed and deployed this year and the significant progress in the healthcare space will continue to make healthcare funds a great investments option. We have highlighted four healthcare mutual funds carrying a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) that are poised to grow further. Moreover, these funds have encouraging year-to-date (YTD) returns. Additionally, the minimum initial investment is within $5000. We expect these funds to outperform their peers in the future.

The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

T. Rowe Price Health Sciences Fund (PRHSX Quick QuotePRHSX - Free Report) aims for long-term capital appreciation. This non-diversified fund invests majority of assets in common stocks of large- and mid-capitalization companies mostly engaged in research, production and distribution of products and services in the healthcare-related industry.

This Zacks sector – Health product has a history of positive total returns for more than 10 years. Specifically, the fund has returned 19.4% and 14.3% over the past three and five-year period, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

PRHSX, a Zacks Mutual Fund Rank #1 fund, has an annual expense ratio of 0.76%, which is below the category average of 1.21%.

Fidelity Select Health Care Portfolio (FSPHX Quick QuoteFSPHX - Free Report) fund aims for capital appreciation. This non-diversified fund invests majority of assets in common stocks of companies principally engaged in the design, manufacture or sale of products or services used for or in connection with health care or medicine.

This Zacks sector – Health product has a history of positive total returns for more than 10 years. Specifically, the fund has returned 19.1% and 17.8% over the past three and five-year period, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSPHX, a Zacks Mutual Fund Rank #1 fund, has an annual expense ratio of 0.70% versus the category average of 1.21%.

Fidelity Select Medical Technology and Devices Portfolio (FSMEX Quick QuoteFSMEX - Free Report) fund aims for capital growth. It invests majority of assets in companies that are engaged in activities such as research, manufacturing, supply and sale of medical equipment and related technologies.

This Zacks sector – Health product has a history of positive total returns for more than 10 years. Specifically, the fund has returned 24.3% and 24.1% over the past three and five-year period, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSMEX, a Zacks Mutual Fund Rank #1 fund, has an annual expense ratio of 0.71%, which is below the category average of 1.21%.

Fidelity Select Biotechnology Portfolio (FBIOX Quick QuoteFBIOX - Free Report) fund aims for capital appreciation. This non-diversified fund invests majority of net assets in common stocks of companies mostly engaged in the research, development and distribution of biotechnological products.

This Zacks sector – Health product has a history of positive total returns for more than 10 years. Specifically, the fund has returned 16.8% and 19.3% over the past three and five-year period, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FBIOX, a Zacks Mutual Fund Rank #2 fund, has an annual expense ratio of 0.72%, which is below the category average of 1.21%.

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