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The biotechnology industry did well remarkably throughout the last year and is likely to continue with the momentum this year. Of course, factors such as mergers and acquisitions, collaborative operations, initial public offerings and substantial job additions to the industry drove the impressive performance in the past year.
In light of the above underlying factors steadily boosting the biotechnology industry, mutual fund investors could consider investing in the space at present.
Biotech on Solid Footing
Biotechnology industry has been in focus since the beginning of this year, following the outbreak of the new epidemic in China. As the death toll in the Asian country continues to climb alongside the number of the infected, investors veered their attention to biotechnology firms that have the potential to come up with a cure for the deadly disease.
In addition, several interesting deals promise to boost performance of the overall industry in the long run. Just last year, Bristol-Myers Squibb’s acquisition of Celgene Corporation and Loxo Oncology’s buyout by Eli Lilly and Company made headlines among the 12 megadeals inked in the industry. Abbvie and Allergan’s $63 billion worth merger also kept investors asking for more.
Moreover, biotech IPOs have been going strong since the start of 2019. Black Diamond Therapeutics, which went public in January, rose 108% on its first day. Last year, as many as 52 biotech firms went public, witnessing a first-day gain of 16%, on average.
These factors are pushing major biotech indexes and ETFs ahead. To be specific, the SPDR S&P Biotech ETF (XBI), iShares Nasdaq Biotechnology ETF (IBB), ProShares Ultra Nasdaq Biotechnology (BIB) and NASDAQ Biotechnology Index (NBI) have gained 13.4%, 9.9%, 13.7% and 9.8%, respectively, in the past year.
3 Best Biotech Fund Choices
We have, therefore, selected three mutual funds that invest in biotech firms, all of which carry a Zacks Mutual Fund Rank #1 (Strong Buy). In addition, the minimum initial investment for these funds is within $5,000.
We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also on the likely future success of the fund.
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).
Fidelity Select Biotechnology Portfolio (FBIOX - Free Report) aims for capital appreciation. The fund invests the majority of its assets in companies that are engaged in the research, development, manufacture and distribution of several biotechnological products and services etc that benefit considerably from scientific and technological advancements in biotechnology. FBIOX is a non-diversified fund that invests in U.S. and non-U.S. issuers alike.
This Zacks sector – Health has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FBIOXcarries a Zacks Rank #1 and has an annual expense ratio of 0.72%, which is below the category average of 1.24%. It has returned 15.1% over a year. The fund has no minimum initial investment.
Franklin Biotechnology Discovery Fund Class A (FBDIX - Free Report) invests the majority of its assets in securities of biotechnology companies and discovery research firms. The non-diversified fund mostly invests in equity securities. FBDIX aims for capital appreciation.
This Zacks sector – Health has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FBDIXcarries a Zacks Rank #1 and has an annual expense ratio of 1.02%, which is below the category average of 1.24%. It has returned 12.8% over a year. The fund has a minimum initial investment of $1000.
Alger Health Sciences Fund Class A (AHSAX - Free Report) seeks long-term capital growth. The fund invests the majority of its assets in securities of companies that are engaged in various activities in the health sciences sector. AHSAX invests across all market capitalizations and may also invest in foreign securities.
This Zacks sector – Health has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
AHSAXcarries a Zacks Rank #2 and has an annual expense ratio of 1.15%, which is below the category average of 1.24%. It has returned 8.9% over a year. The fund has a minimum initial investment of $1000.
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3 Top-Performing Biotech Funds for 2020
The biotechnology industry did well remarkably throughout the last year and is likely to continue with the momentum this year. Of course, factors such as mergers and acquisitions, collaborative operations, initial public offerings and substantial job additions to the industry drove the impressive performance in the past year.
In light of the above underlying factors steadily boosting the biotechnology industry, mutual fund investors could consider investing in the space at present.
Biotech on Solid Footing
Biotechnology industry has been in focus since the beginning of this year, following the outbreak of the new epidemic in China. As the death toll in the Asian country continues to climb alongside the number of the infected, investors veered their attention to biotechnology firms that have the potential to come up with a cure for the deadly disease.
In addition, several interesting deals promise to boost performance of the overall industry in the long run. Just last year, Bristol-Myers Squibb’s acquisition of Celgene Corporation and Loxo Oncology’s buyout by Eli Lilly and Company made headlines among the 12 megadeals inked in the industry. Abbvie and Allergan’s $63 billion worth merger also kept investors asking for more.
Moreover, biotech IPOs have been going strong since the start of 2019. Black Diamond Therapeutics, which went public in January, rose 108% on its first day. Last year, as many as 52 biotech firms went public, witnessing a first-day gain of 16%, on average.
These factors are pushing major biotech indexes and ETFs ahead. To be specific, the SPDR S&P Biotech ETF (XBI), iShares Nasdaq Biotechnology ETF (IBB), ProShares Ultra Nasdaq Biotechnology (BIB) and NASDAQ Biotechnology Index (NBI) have gained 13.4%, 9.9%, 13.7% and 9.8%, respectively, in the past year.
3 Best Biotech Fund Choices
We have, therefore, selected three mutual funds that invest in biotech firms, all of which carry a Zacks Mutual Fund Rank #1 (Strong Buy). In addition, the minimum initial investment for these funds is within $5,000.
We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also on the likely future success of the fund.
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).
Fidelity Select Biotechnology Portfolio (FBIOX - Free Report) aims for capital appreciation. The fund invests the majority of its assets in companies that are engaged in the research, development, manufacture and distribution of several biotechnological products and services etc that benefit considerably from scientific and technological advancements in biotechnology. FBIOX is a non-diversified fund that invests in U.S. and non-U.S. issuers alike.
This Zacks sector – Health has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FBIOX carries a Zacks Rank #1 and has an annual expense ratio of 0.72%, which is below the category average of 1.24%. It has returned 15.1% over a year. The fund has no minimum initial investment.
Franklin Biotechnology Discovery Fund Class A (FBDIX - Free Report) invests the majority of its assets in securities of biotechnology companies and discovery research firms. The non-diversified fund mostly invests in equity securities. FBDIX aims for capital appreciation.
This Zacks sector – Health has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FBDIX carries a Zacks Rank #1 and has an annual expense ratio of 1.02%, which is below the category average of 1.24%. It has returned 12.8% over a year. The fund has a minimum initial investment of $1000.
Alger Health Sciences Fund Class A (AHSAX - Free Report) seeks long-term capital growth. The fund invests the majority of its assets in securities of companies that are engaged in various activities in the health sciences sector. AHSAX invests across all market capitalizations and may also invest in foreign securities.
This Zacks sector – Health has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
AHSAX carries a Zacks Rank #2 and has an annual expense ratio of 1.15%, which is below the category average of 1.24%. It has returned 8.9% over a year. The fund has a minimum initial investment of $1000.
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.
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