#1 Best Mutual Fund: Fidelity Select Biotechnology
YTD Return: +37.5%
Fidelity Select Biotechnology (MUTF:FBIOX), a mid-cap growth fund, has had a whale of a year — reflecting strong performance in the biopharmaceutical sector. This is the bleeding edge junction of healthcare and technology. Since some of these new drugs may never come to market, FBIOX is a riskier play than Big Pharma-focused funds. But the profit potential is huge, with companies like Gilead Sciences (NASDAQ:GILD) upping the ante with new HIV and hepatitis C treatments, and Amgen’s (NASDAQ:AMGN) profits soaring on biologics like the rheumatoid arthritis drug Enbrel.
Top 3 Holdings:
1. Amgen: 13.2% of holdings
2. Gilead Sciences: 13.2% of holdings
3. Biogen (NASDAQ:BIIB): 7.1% of holdings
Manager(s): Rajiv Kaul has been the lead manager on FBIOX since Oct 2005. Kaul’s biotech street cred is well established — so is his portfolio management expertise. He turns over even the smallest rocks in the arcane biopharmaceutical sector, then digs deep to master the companies and their drug pipelines, identify the most promising treatments, and estimate how much cash those products can throw off over the next decade.
Takeaway: Biotech should continue to be a vibrant market in 2013. While risk is always a concern in this industry, Kaul has his finger on the pulse of the industry and a good track record of managing this mutual fund; three-year performance of FBIOX is 23%. The lack of load and below-average net expense ratio sweeten the deal.
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