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Is Vanguard Health Care Adm (VGHAX) a Strong Mutual Fund Pick Right Now?

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If you've been stuck searching for Sector - Health funds, you might want to consider passing on by Vanguard Health Care Adm (VGHAX - Free Report) as a possibility. VGHAX holds a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

Zacks categorizes VGHAX 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

VGHAX finds itself in the Vanguard Group family, based out of Malvern, PA. The Vanguard Health Care Adm made its debut in November of 2001 and VGHAX has managed to accumulate roughly $37.45 billion in assets, as of the most recently available information. The fund's current manager, Jean M. Hynes, has been in charge of the fund since May of 2008.

Performance

Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 14.04%, and it sits in the bottom third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 2.26%, which places it in the bottom 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 VGHAX over the past three years is 13.09% compared to the category average of 12.91%. The fund's standard deviation over the past 5 years is 12.45% compared to the category average of 16.21%. 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. VGHAX lost 31.77% in the most recent bear market and outperformed comparable funds by 1.08%. This could mean that the fund is a better choice than comparable funds during a bear market.

Nevertheless, with a 5-year beta of 0.9, the fund is likely to be less volatile than the market average. Because alpha represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, one should pay attention to this metric as well. VGHAX's 5-year performance has produced a positive alpha of 0.72, which means managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

Holdings

Exploring 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.

As of the last filing date, the mutual fund has 96.66% of its assets in stocks, which have an average market capitalization of $72.05 billion. The fund has the heaviest exposure to the following market sectors:

  1. Health
  2. Finance
  3. Other

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, VGHAX is a no load fund. It has an expense ratio of 0.33% compared to the category average of 1.34%. So, VGHAX is actually cheaper than its peers from a cost perspective.

While the minimum initial investment for the product is $50,000, investors should also note that each subsequent investment needs to be at least $1.

Bottom Line

Overall, Vanguard Health Care Adm has a low Zacks Mutual Fund rank, and in conjunction with its comparatively weak performance, average downside risk, and lower fees, Vanguard Health Care Adm looks like a somewhat weak choice for investors right now.

Want even more information about VGHAX? Then go over to Zacks.com and check out our mutual fund comparison tool, and all of the other great features that we have to help you with your mutual fund analysis for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.




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