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Even with the uncertainty of the Affordable Care Act’s (ACA) future, the Healthcare sector has been one of the top performing segments in 2017.  Currently there are two plans in motion with Republicans attempting one more time to repeal the act, and a second plan more geared at a bipartisan solution. Committee meetings are expected to start next month in attempts to find a middle ground between both political parties to fix several parts of the ACA.  The hearings are supported by both Republican chairman of the Health, Education, Labor, and Pensions Committee member Senator Lamar Alexander of Tennessee, and the committee’s top Democrat Senator Patty Murray of Washington State.  These two Senators have cooperated with each other on a few other pieces of legislation.   

A bipartisan solution seems to marry the best ideas from each party and would most likely help both the consumer and businesses alike.  

What we looked for    

To capitalize on the healthcare sector, we utilized the Zacks mutual fund screener to identify the best funds with specific characteristics.  First, the fund had to have a Zacks Rank #1, Strong Buy rating.  Second, they had to have an expense ratio below 1.2 with no load fees.  Third the fund had to have significant exposure to stocks in the healthcare sector.  Lastly, they had to have a history of success, and be maintained by a top fund manager.

The Picks

Fidelity Select Medical Equipment & Systems (FSMEX - Free Report) fund’s objective is to seek capital appreciation. Normally the fund invests at least 80% of assets in common stocks of companies principally engaged in research, development, manufacture, distribution, supply, or sale of medical equipment and devices and related technologies. The fund offers dividends and capital gains twice a year in April and December.

Cost Specifics: The minimal investment is $2,500, it has a 0.55% management fee, and the total expense ratio is 0.76.  

Performance and Management: YTD return +24.3%, 1 year +12.9%, 5 year +22.4%, 10 year +13.7%.  FSMEX has been managed by Edward Yoon since 2007 who has been a research analyst and portfolio manager at Fidelity since 2006.  Mr. Yoon has a BA in business economics from Brown University.  

Top Holdings: As of the most recent filings, the top five positions were held in Medtronic PLC, Boston Scientific, Becton, Dickerson and Co., Intuitive Surgical, and Danaher Corp.

Hartford Healthcare HLS Fund Class IA (HIAHX - Free Report) is a stock fund that invests in health care, a sector that is experiencing innovations and breakthroughs across multiple subsectors. The fund’s objective seeks long-term growth of capital.  

Cost Specifics: There is no minimal investment associated with this fund, but it does have a 0.84% management fee with a total expense ratio of 0.89.  

Performance and Management: The YTD return is +22.5%, 1 year +13.2%, 5 year +20.6%, and 10 year +12.8%.  HIAHX is currently team managed which is led by; Robert Deresiewicz, a biotechnology analyst with an MBA from Harvard. And Ann Gallo, a global industry analyst with an MS from the Massachusetts Institute of Technology.  

Top Holdings: As of the most recent filing the top 5 positions consisted of United Health Group, Medtronic, Allergan, Celgene, Bristol-Myers Squibb.  

Fidelity Select Health Care (FSPHX - Free Report) fund’s objective is to seek capital appreciation. The fund normally invests its 80% 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. Dividends and capital gains are declared in April and December every year.

Cost Specifics:  The minimal investment is $2,500, it has a management fee of 0.55%, and has a total expense ratio of 0.73.

Performance and Management: The YTD return is +22.3%, 1 year +9.8%, 5 year +21.1%, and 10 year +13.5%.  FSPHX is currently team managed and led by Yolanda Strock, the sector leader of the Health Care Equity Research group.  She has an MBA from Duke University, a B.S. from University of Pennsylvania (Warton), and a B.A from the University of Pennsylvania.  

Top Holdings:  As of the most recent filing the top 5 positions were in Amgen, Allergan, United Healthcare Group, Boston Scientific, and Medtronic.  

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