Health-Care Funds
By DAWN SMITH
SmartMoney
November 16, 2004; Page D2
FWIW
online.wsj.com
The prospect of a second term for George W. Bush has proved to be good medicine for health-care funds. For the week that included Election Day, the group jumped 4.2%, compared with 3% for the Standard & Poor's 500-stock index, according to data from investment-research firm Lipper Inc.
The Bush victory -- which calmed investor fears of greater involvement by the federal government in health care -- is a bright spot in an otherwise tough year for the industry, particularly among pharmaceuticals companies, which have faced obstacles including pricing pressures, weak research pipelines and patent expirations, analysts say. Rising litigation risk is also a major concern, as investors fear that Merck & Co., whose stock was pummeled when it withdrew its Vioxx painkilling drug, might portend future problems for the sector.
Despite the recent run-up, many health-care stocks still seem inexpensive. The group as a whole gained just 2.8% in 2004, as of Nov. 9, compared with 6.2% for the S&P 500. And the long-term prognosis for the industry remains strong. You've heard it before, but it bears repeating: As the enormous baby-boomer generation marches toward retirement, demand for health-care products and services is expected to increase greatly.
Although some funds slice the health-care universe quite thin, a broad health-care fund is the most suitable investment for most investors. "The narrower you go, the more risk you take on," says Phil Edwards, managing director of investment services at Standard & Poor's.
We screened for top-performing no-load health-care funds. Our criteria: three- and five-year annualized returns in the top 50% of the classification and expense ratios in the bottom 50%. We also looked for net assets of at least $50 million, a minimum initial investment of $5,000 or less, and availability to new investors. Seven funds made the cut.
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Seven Top-Performing Health-Care Funds
We screened for high returns, low expenses and net assets of at least $50 million.
FUND (TICKER) ~ ANNUALIZED 5-YEAR RETURN ~ ANNUALIZED 3-YEAR RETURN ~ EXPENSE RATIO ~ MINIMUM INITIAL INVESTMENT
Fidelity Select Medical Delivery(FSHCX) ~ 19.89% ~ 16.44% ~ 1.30% ~ $2,500
Fidelity Select Medical Equipment & Systems(FSMEX) ~ 18.46 ~ 14.43 ~ 1.18 ~ 2,500
Exeter Life Sciences (EXLSX) ~ 18.34 ~ 4.52 ~ 1.18 ~ 2,000
Icon Healthcare (ICHCX) ~ 15.98 ~ 11.24 ~ 1.34 ~ 1,000
Pimco RCM Biotechnology (DRBNX) ~ 15.28 ~ 0.31 ~ 1.61 ~ 5,000
Pimco RCM Global Health Care (DGHCX) ~ 14.14 ~ 2.15 ~ 1.61 ~ 5,000
T. Rowe Price Health Sciences (PRHSX) ~ 11.11 ~ 5.78 ~ 1.00 ~ 2,500
Note: All data as of Nov. 9, 2004
Sources: Lipper Inc.; company reports |
