U.S. Markets closed

Which Healthcare Mutual Fund Should You Buy: FBIOX or PRHSX?

Nitish Marwah

Often, the healthcare sector is relied on for safeguarding investments. This is because demand for healthcare services does not vary so much with market conditions and investments in the sector provide sufficient protection to the capital invested.

Many pharmaceutical companies also offer regular dividends. Companies that pay out consistent dividends are financially stable and generate consistent cash flows irrespective of market conditions. Mutual funds are perfect choices for investors looking to enter this sector since they possess the advantages of wide diversification and analytical insight.

The U.S. healthcare sector has performed decently so far this year. The Health Care Select Sector SPDR Fund (XLV) has gained 6.4% year to date despite fears related to a slowdown in the global economy as well as trade tensions.

So far this year, mega-scale healthcare mergers, corporate restructuring as well as FDA approvals have buoyed gains for the space. As a matter of fact, America’s healthcare sector is being anticipated to experience a major revolution in the days to come. With an uptick in over-the-counter drug sales coupled with major breakthroughs in the treatment of rare conditions, the healthcare space is deemed to gain big.

Under such circumstances, investing in healthcare mutual funds seems prudent. However, choosing the right mutual funds for your portfolio can become cumbersome. Let us, therefore, discuss which of these two funds are better for you.

Fidelity Select Biotechnology Portfolio (FBIOX)

The fund mostly invests in common stocks of companies that are engaged in research, development, manufacture and distribution of biotechnological products, processes and related services. The fund seeks appreciation of capital.

This Sector-Health product has a history of positive total returns for over 10 years. Specifically, the fund’s returns are 11.7% over the 3-year and 7.5% of the 5-year period. To see how this fund performed compared in its category, and other #1 and #2 Ranked Mutual Funds, please click here.  

The Fidelity Select Biotechnology Portfolio fund, as of the last filing, allocates its assets in top two major groups — Small Growth and Foreign Stock. Further, as of the last filing, Amgen Inc, Abbvie Inc and Gilead Sciences Inc were the top holdings for FBIOX.

This Zacks Mutual Fund Rank #2 (Buy) was incepted in December 1985 and is managed by Fidelity. FBIOX carries an expense ratio of 0.72% and requires a minimal initial investment of $0.

T. Rowe Price Health Sciences Fund (PRHSX)

The fund seeks appreciation of capital in the long-term. It invests a minimum of 80% of its assets in common stocks of companies which are involved in research, development, production and distribution of products and services which are related to healthcare, medicine or life sciences. The fund mostly invests in mid- and large-capitalization companies.

This Sector-Health product has a history of positive total returns for over 10 years. Specifically, the fund’s returns over the 3 and 5-year benchmarks are14.2% and 12.9%, respectively. To see how this fund performed compared in its category, and other #1 and #2 Ranked Mutual Funds, please click here.  

T. Rowe Price Health Sciences Fund, as of the last filing, allocates its assets in the top two major groups — Small Growth and Intermediate Bond. Further, as of the last filing, Unitedhealth Group Inc and Intuitive Surgical Inc were the top holdings for PRHSX.

This Zacks Rank #1 (Strong Buy) was incepted in December 1995 and is managed by T. Rowe Price. PRHSX carries an expense ratio of 0.77% and requires a minimal initial investment of $2,500.

To Conclude

While both FBIOX and PRHSX are recommended buys, upon having a closer look, we find that the former is a clear winner. PRHSX is much more expensive compared to FBIOX (it has a minimum initial investment $2,500 compared to FBIOX’s $0). Further, its administrative and other operating expenses are also higher compared to FBIOX. So, one should clearly bet on FBIOX for higher returns on low investments.

Want key mutual fund info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Get Your Free (PRHSX): Fund Analysis Report
 
Get Your Free (FBIOX): Fund Analysis Report
 
To read this article on Zacks.com click here.