by Bill Wysor | September 19, 2013 10:58 am
The debate over the Affordable Care Act — commonly known as “Obamacare” — has been an ongoing topic, with divided opinions on both sides of the healthcare issue. Still, it certainly appears that costs will rise for many, and it is clear that more people will be covered as a result of this legislation.
However, as we now grow closer to full implementation of the Affordable Care Act, perhaps the best move is to consider the options that easily allow individual investors to participate in the opportunity. Certainly there are winners and losers in this changing industry, but the good news is that there are mutual funds that have a good handle on the pulse of this sector and the names poised to profit.
Here are three no-load healthcare mutual funds to consider that are open to new investors:
Vanguard Health Care (VGHCX) has stood out as a winner for a long time. Legendary manager Ed Owens has retired from the fund, but manager Jean Hynes is continuing to lead this fund in the right direction.
VGHCX mostly invests in large-cap names, which should not be a surprise given the large $29.3 billion asset base. For the most part, this is a story of patient stock picking, with turnover at a mere 8% annually.
About 78% of this fund is invested in U.S. stocks, with 22% invested outside the U.S. Current top holdings include: Merck (MRK), UnitedHealth Group (UNH), Roche (RHHBY), Amgen (AMGN) and Forest Laboratories (FRX).
The mutual fund is up 30.5% year-to-date, trumping the market by nearly 50%, and has averaged roughly 11% returns annually over the past 10 years, according to Morningstar data.
As is typical with funds from Vanguard, expenses are minimal at 0.35% annually, or $35 for ever $10,000 invested.
For a bit more daring mutual fund option, Fidelity Select Health Care (FSPHX) might be the right choice.
Manager Edward Yoon has been on this fund since 2008 and has a good portion of the portfolio in the biotechnology sector. This is a move that has paid off handsomely, with the fund up a robust 39.4% YTD, and 11.3% annual returns on average during the past 10 years.
Current top holdings include Gilead Sciences (GILD), Amgen (AMGN), Actavis (ACT), McKesson (MCK) and Boston Scientific (BSX).
Asset size for FSPHX is a more manageable $3.7 billion, with an expense ratio of 0.78%. However, turnover is fairly high at 95%.
PrimeCap Odyssey Aggressive Growth (POAGX) is a more diversified mutual fund than the aforementioned funds, yet investing here still means you get a heavy dose of healthcare names, with 30% of the portfolio invested in this sector.
POAGX is a mutual fund that seeks out growth at a reasonable price and displays great patience as well, with turnover at just 14%. The fund is dedicated to small and midsize stocks, and often holds names for a number of years. For example, top holding Pharmacyclics (PCYC) was first purchased at the end of 2004, as this fund was starting up.
This fund is team-managed by PrimeCap management out of Pasadena, Calif. POAGX is up an impressive 44.4% YTD, and boasts annualized returns of 20.4% over the past five years, which has helped grow POAGX’s assets up to $4 billion. The fund’s focus on technology and healthcare has been timely in this market, but this is a holding best suited for the long-term.
Current top holdings include Pharmacyclics, Roche, Dreamworks Animation (DWA), Seattle Genetics (SGEN) and comScore (SCOR).
POAGX charges 0.68% in expenses.
As of this writing, Bill Wysor was long POAGX.
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