Schwab Health Care
Given the plethora of health care fund choices, I’ll admit that I’m surprised the Schwab Health Care Fund (MUTF:SWHFX) came out on top. Yet, there it is, outperforming most other funds in the category, and doing so with less volatility (and for the most part, with a lower expense ratio).
A stake in Schwab’s health care fund is a stake in America’s biggest pharmaceutical names, like Merck (NYSE:MRK), Pfizer (NYSE:PFE) and Amgen (NASDAQ:AMGN). Yes, it feels a tad predictable, and it is. But, it works, and somehow Schwab makes it work with a lot less portfolio turnover — a mere 24% for the past twelve months — than other healthcare funds.
For perspective, the Janus Global Life Sciences Fund (MUTF:JAGLX) turned over 50% of its holdings in the past twelve months, while the BlackRock Health Sciences Opportunities Portfolio (MUTF:SHSAX) saw turnover of 135% over the past year. That means a lot less tax liability with the Schwab health care fund.
But what about the burden that Obamacare is going to place on the industry? What about the patent cliff so many drug companies are careening over right now? The bulk of those headaches are either overblown or already baked into stock prices, making the sector undervalued and ripe for an entry.