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3 Healthcare Mutual Funds to Buy as the Sector Turns Around
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The healthcare sector has been on the rise since November 2023 and has been one of the best-performing sectors since the turn of the year. Last week marked the ninth straight weekly gain for the sector, its longest winning streak since December 2019.
The sector’s turnaround since November has been remarkable, but 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.
However, there is a lot going for the sector, with market participants currently betting on healthcare to emerge as one of the winners for 2024. For starters, the 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, primarily with an eye on the Fed’s tight monetary policy.
Also, health spending in the United States is projected to grow at an average annual rate of 5.4% for 2019-2028 and to reach $6.2 trillion by 2028. Even as the industry faces labor shortages and recessionary pressures in the post-pandemic world marked by a European war, it would grow at a higher rate than the overall economy.
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 2023, particularly in the final quarter. The S&P 500 Select Sector SPDR for Healthcare (XLV) grew 2% over the past year as of Dec 31, 2023. However, in December itself, the sector grew 4.3% and in the quarter, 6.4%. 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 invest in 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.
Putnam Global Health Care Fund (PHSYX - Free Report) primarily invests in common stocks of large and mid-cap healthcare companies. PHSYX invests in companies that its advisors believe have favorable investment potential.
Michael Maguire has been the lead manager of PHSYX since November 2016. The fund has 8.7% of its portfolio invested in UnitedHealth Group, 7.3% in Eli Lilly and 5.8% in AstraZeneca.
PHSYX’s 3-year and 5-year annualized returns are 7.7% and 13.7%, respectively. Its net expense ratio is 0.82% compared to the category average of 1.03%. PHSYX has 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.
Janus Henderson Global Life Sciences Fund (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 6.8% of its portfolio invested in UnitedHealth Group, 4.8% in Eli Lilly and 4.2% in AstraZeneca.
JFNAX’s 3-year and 5-year annualized returns are 3.6% and 12.4%, respectively. Its net expense ratio is 0.98% compared to the category average of 1.03%. JFNAXhas a Zacks Mutual Fund Rank #1.
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 6.6% of its portfolio invested in UnitedHealth Group, 6.2% in Eli Lilly and 6% in AstraZeneca.
VGHCX’s 3-year and 5-year annualized returns are 6% and 10.5%, respectively. Its net expense ratio is 0.36% compared to the category average of 1.03%. VGHCX has a Zacks Mutual Fund Rank #1.
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3 Healthcare Mutual Funds to Buy as the Sector Turns Around
The healthcare sector has been on the rise since November 2023 and has been one of the best-performing sectors since the turn of the year. Last week marked the ninth straight weekly gain for the sector, its longest winning streak since December 2019.
The sector’s turnaround since November has been remarkable, but 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.
However, there is a lot going for the sector, with market participants currently betting on healthcare to emerge as one of the winners for 2024. For starters, the 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, primarily with an eye on the Fed’s tight monetary policy.
Also, health spending in the United States is projected to grow at an average annual rate of 5.4% for 2019-2028 and to reach $6.2 trillion by 2028. Even as the industry faces labor shortages and recessionary pressures in the post-pandemic world marked by a European war, it would grow at a higher rate than the overall economy.
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 2023, particularly in the final quarter. The S&P 500 Select Sector SPDR for Healthcare (XLV) grew 2% over the past year as of Dec 31, 2023. However, in December itself, the sector grew 4.3% and in the quarter, 6.4%. 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 invest in 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.
Putnam Global Health Care Fund (PHSYX - Free Report) primarily invests in common stocks of large and mid-cap healthcare companies. PHSYX invests in companies that its advisors believe have favorable investment potential.
Michael Maguire has been the lead manager of PHSYX since November 2016. The fund has 8.7% of its portfolio invested in UnitedHealth Group, 7.3% in Eli Lilly and 5.8% in AstraZeneca.
PHSYX’s 3-year and 5-year annualized returns are 7.7% and 13.7%, respectively. Its net expense ratio is 0.82% compared to the category average of 1.03%. PHSYX has 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.
Janus Henderson Global Life Sciences Fund (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 6.8% of its portfolio invested in UnitedHealth Group, 4.8% in Eli Lilly and 4.2% in AstraZeneca.
JFNAX’s 3-year and 5-year annualized returns are 3.6% and 12.4%, respectively. Its net expense ratio is 0.98% compared to the category average of 1.03%. JFNAXhas a Zacks Mutual Fund Rank #1.
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 6.6% of its portfolio invested in UnitedHealth Group, 6.2% in Eli Lilly and 6% in AstraZeneca.
VGHCX’s 3-year and 5-year annualized returns are 6% and 10.5%, respectively. Its net expense ratio is 0.36% compared to the category average of 1.03%. VGHCX has a Zacks Mutual Fund Rank #1.
Want key mutual fund info delivered straight to your inbox?
Zacks' free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>