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

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Having trouble finding a Sector - Health fund? Vanguard Health Care Admiral (VGHAX - Free Report) is a potential starting point. VGHAX possesses a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

The world of Sector - Health funds is an area filled with options, such as VGHAX. Healthcare is one of the biggest sectors of the American economy, and Sector - Health mutual funds provide a great opportunity to invest in this industry. Here, funds can include everything from for-profit hospitals to pharmaceutical companies and medical device manufacturers.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VGHAX. Vanguard Health Care Admiral debuted in November of 2001. Since then, VGHAX has accumulated assets of about $35.74 billion, according to the most recently available information. Jean M. Hynes is the fund's current manager and has held that role since May of 2008.

Performance

Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 5.31%, and is in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 7.92%, which places it in the top 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. Compared to the category average of 13.54%, the standard deviation of VGHAX over the past three years is 13.83%. The standard deviation of the fund over the past 5 years is 14.04% compared to the category average of 14.04%. This makes the fund as volatile as its peers over the past half-decade.

Risk Factors

Investors cannot discount the risks to this segment though, as it is always important to remember the downside for any potential investment. In the most recent bear market, VGHAX lost 31.76% and outperformed its peer group by 2%. This could mean that the fund is a better choice than comparable funds during a bear market.

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. VGHAX has a 5-year beta of 0.88, which means it 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 has generated a negative alpha over the past five years of -2.35, demonstrating that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, VGHAX is a no load fund. It has an expense ratio of 0.26% compared to the category average of 1.36%. So, VGHAX is actually cheaper than its peers from a cost perspective.

This fund requires a minimum initial investment of $50,000, and each subsequent investment should be at least $1.

Bottom Line

Overall, Vanguard Health Care Admiral ( VGHAX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

For additional information on the Sector - Health area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into VGHAX too for additional information. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.


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